Shri Nagnath Hanmantrao Jalkote, Aurangabad V. Asstt.CIT(Cen.), Aurangabad, Aurangabad

ITA 622/PUN/2005

• Counselvise Citation: 62224514 RSA 2005
• Duration Of Justice: 9 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-11-2013
• Assessment Year: misc
• Appeal Filed On: 01-03-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Unexplained investment; Unexplained expenditure; Gift; Business income; Business expenditure; Income from undisclosed sources; Search and seizure; Salary income; Loose papers; Document seized; Share purchase agreement; Source of fund; Corroborative evidences; Valuation report; Block assessment; Onus to prove; Documents seized
• Section: 143(3); 131; 69; 132; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1049/PN/2005 (BLOCK PERIOD 01-04-2005 TO 21-11-2001 ) ACIT, CENTRAL CIRCLE, AURANGABAD .. APPELLANT VS. SHRI NAGNATH HANMANTHRAO JALKOTE, 6, MUKTESH, NEW OSMANPURA, AURANGABAD - 431005 .. RESPONDENT PAN NO.ACRPJ 9402A ITA NO. 622/PN/2005 (BLOCK PERIOD 01-04-2005 TO 21-11-2001 ) SHRI NAGNATH HANMANTRAO JALKOTE, 6, MUKTESH, NEW OSMANPURA, AURANGABAD 431 005 PAN NO. ACRPJ 9402A .. APPELLANT VS. ACIT, CENTRAL, AURANGABAD .. RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SMT. M.S. VERMA DATE OF HEARING : 20-03-2014 DATE OF PRONOUNCEMENT : 12-05-2014 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE REVENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DI RECTED AGAINST THE ORDER DATED 28-01-2005 OF THE CIT(A)-I, NAGPUR RELA TING TO BLOCK PERIOD 01-04-2005 TO 21-11-2001. FOR THE SAKE OF C ONVENIENCE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPO SED OF BY THIS COMMON ORDER. 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE WAS A SENIOR GOVERNMENT OFFICER WORKING AS SUPERINTENDING ENGINE ER WITH PWD, GOVT. OF MAHARASHTRA. A SEARCH AND SEIZURE OPERATI ON U/S.132 OF THE I.T. ACT WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 21-11-2001. AT THE TIME OF SEARCH HE WAS OFFICER O N SPECIAL DUTY IN THE OFFICE OF COMMISSIONERS OFFICE AT AURANGABAD. SIM ULTANEOUS SEARCH ACTION WAS ALSO CONDUCTED IN THE PREMISES OF THE FO LLOWING CLOSE RELATIVES AND ASSOCIATES OF THE ASSESSEE : 1. SHRI M.H. ANDURE, ASSESSEES CO-BROTHER 2. SHRI PRASHANT BALIRAM MAHAJAN, ASSESSEES BROTHER-IN -LAW 3. SHRI BALIRAM BASWANT MAHAJAN, ASSESSEES FATHER-IN-L AW 4. RESIDENTIAL AND BUSINESS PREMISES OF SHRI M.B. PATIL GROUP GOVERNMENT CONTRACTOR WERE ALSO COVERED DURING SEARCH . 2.1 IN RESPONSE TO THE NOTICE U/S.158BC THE ASSESSE E FILED RETURN OF INCOME DECLARING UNDISCLOSED INCOME AT RS.47,010/-. THE AO AFTER CONSIDERING THE VARIOUS SUBMISSIONS MADE BY THE ASS ESSEE FROM TIME TO TIME DETERMINED THE TOTAL UNDISCLOSED INCOME OF THE ASSESSEE AT RS.11,74,10,622/- BY MAKING THE FOLLOWING ADDITIONS : SR.NO. PARTICULARS AMOUNT (RS.) RETURNED UDI (NSS WITHDRAWALS) 47,010/- ADD: ADDITIONS MADE BY THE ASSESSING OFFICER 1 SHRI M.H. ANDURE, SHRI B.B. MAHAJAN (PRASHANT MAHAJAN) SHRI M.B. PATIL SHRI GANGADHAR MAHAJAN AND OTHER PERSONS THROUGH THEIR RUNNING ACCOUNTS IN THE DIARIES A-68, A-71 & A-67 9,82,83,984/- 2 COST OF CONSTRUCTION OF HOUSE AT 6, OSMANPURA 52,58,000/- 3 INVESTMENT IN MITMITA LAND 34,30,000/- 4 INVESTMENT IN PADEGAON FARM 4,80,428/- 5 INVESTMENT IN FLAT AT MUMBAI, ZEN CAR & RENUKA PROPERTY 33,47,000/- 6 INVESTMENT IN SHOPS AT APNA BAZAR 5,00,000/- 7 EXPENDITURE INCURRED THROUGH THE RUNNING ACCOUNTS IN THE DIARIES 24,92,200/- 8 OTHER INVESTMENTS THROUGH THE RUNNING ACCOUNTS IN THE DIARIES 35,72,000/- 11,74,10,622/- ROUNDED TO 11,74,10,620/- 3 2.2 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, R EMAND REPORT FROM THE AO AND REJOINDER OF THE ASSESSEE TO SUCH R EMAND REPORT GAVE PART RELIEF TO THE ASSESSEE. 2.3 AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CI T(A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFOR E US : ITA NO.1049/PN/2005 (BY REVENUE) : 3. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERR ED IN DELETING THE ADDITION OF RS.9,82,83,984/- MADE BY THE A.O. IN RESPECT OF UNACCOUNTED ADVANCES GRANTED TO SHRI M.B. PATIL, SHR I M.H. ANDURE & SONS & SHRI P.B. MAHAJAN AND VARIOUS OTHER PERSONS BY SHRI N.H. JALKOTE AS PER RUNNING ACCOUNTS MAINTAINED BY HIM IN THE SEIZE D DIARIES. (PARA 3.125 OF THE APPELLATE ORDER). 2. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN HOLDING THAT THE A.O. HAS PRESUMED THAT SHRI M.B. PATIL AND S HRI P.B. MAHAJAN & SHRI M.H. ANDURE HAS SIGNED ON CERTAIN PAGES OF THE DI ARY, WHICH SHOW THE UNDERTAKING GIVEN BY THESE PERSONS FOR REPAYMENT OF THE FUNDS BORROWED BY THEM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN HOLDING THAT THE A.O. HAS PROCEEDED TO HOLD THE TRANSACTIONS APPEARING IN THE DIARIES A-67, A-68 & A-71 BELONGED TO THE APPELLANT ESSENTIALLY ON THE PRESUMPTION THAT THE SAID DIARIES WERE WRITTEN AND FOU ND TO BE IN HIS POSSESSION DURING THE COURSE OF SEARCH OPERATIONS (PARA 3. 91 OF THE APPELLATE ORDER) IGNORING THE FACT THAT THE DIARIES WERE WRITTEN BY THE ASSESSEE HIMSELF IN HIS OWN HANDWRITING WHICH IS ALSO ADMIT TED FACT BY THE ASSESSEE SHRI N.H. JALKOTE IN ANSWER TO Q.NO.2 OF HI S STATEMENT RECORDED U/S.132(4) ON 21-11-2001 AND ANSWER TO Q.NO. 2 OF HIS STATEMENT RECORDED U/S.131 ON 13-12-2001. 4. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN HOLDING THAT THE TRANSACTIONS APPEARING IN THE SEIZED DIARY CA NNOT BE TAKEN THAT OF THE APPELLANT (PARA 3.100 OF THE APPELLATE ORDER ). 5. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED ON ONE HAND IN HOLDING THAT SINCE THE TRANSACTIONS APPEARING IN T HE SAID DIARIES WERE OUT OF THE BOOKS OF ACCOUNTS, IT WAS FELT SAFE IN THE CUSTODY OF SHRI JALKOTE WHO HAPPENED TO BE A SENIOR GOVT. SERVANT AND ON THE OTHER HAND GIVING A FINDING THAT BUT THERE IS NO EVIDENC E REGARDING SOURCE OF ANY UNEXPLAINED INVESTMENT OF THE APPELLANT WITHOUT APPRECIATING AND WITHOUT VISUALISING THE CIRCUMSTANCES UNDER WHICH THE A SSESSEE BEING EXECUTIVE ENGINEER IN PUBLIC WORKS DEPARTMENT AT DIF FERENT PLACES LIKE MUMBAI, AHMEDNAGAR ETC., DURING THE RELEVANT PERIOD WAS CONTINUOUSLY AND METICULOUSLY MAINTAINING THE DATE-WISE RUNNING AC COUNT OF SHRI M.B. PATIL, THE GOVT. CONTRACTOR OF AURANGABAD WORK ING MAINLY FOR PWD, IN THE SEIZED DIARIES IN HIS OWN HANDWRITING, WHICH IS DISCUSSED IN PARA 4 8.1 AND 8.2 OF THE ASSESSMENT ORDER AND ALSO IN THE REMA ND REPORT AND THIS ASPECT HAS NOT BEEN DEALT WITH BY CIT(A). 6. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN IGNORING THE FACT THAT THE A.O. HAD FULL JURISDICTION IN RESPE CT OF BLOCK ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE AND FOR THAT PURPOSE, I T WAS VERY MUCH ESSENTIAL TO ENQUIRE WITH THE ASSESSEE, TO ANALYSE AND EXA MINE THE ENTRIES IN HIS SEIZED DOCUMENTS INCLUDING THE ENTRIES IN RUNNING ACCOUNT MAINTAINED IN THE NAME OF SHRI M.B. PATIL. 7. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN OBSERVING THAT THE SETTLEMENT COMMISSION, MUMBAI VIDE ITS ORDER U/S.245D(1) DATED 12-08-2003 AFTER CONSIDERING THE OBJECTIONS RA ISED BY THE DEPARTMENT AND THEREBY AFFIRMING THE CONTENTION OF THE APPELLANT, THAT THE ENTRIES IN THE SEIZED DIARIES BELONGED TO SHRI M.B . PATIL AND ASSOCIATES AND, THEREFORE, THE CORRESPONDING UDI NEEDED TO BE TAXED IN HIS HANDS (PARA 3.101 OF THE APPELLATE ORDER). 8. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN HOLDING THAT SHRI ANDURE AND OTHERS HAD EARNED UNACCOUNTED I NCOME FROM BUSINESS WHICH HAS MANIFESTED IN THE FORM OF ENTRIES APPE ARING IN THE SEIZED DIARIES AND THEREFORE, THE ADMISSION OF SUCH ENTR IES BY THESE PERSONS AND UDI OFFERED IN THEIR BLOCK RETURN HAVE TO BE CONSIDERED THE OWNERSHIP OF THE TRANSACTIONS IN THE SEIZED DIARY IGNO RING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY CONTEMPORARY EVIDENCE TO SHOW THAT SHRI M.H. ANDUR HAD REALLY EARNED SUBSTANTIAL INCOME AS SHOWN IN THE BLOCK RETURN FILED BY HIM (PARA 3.102 OF THE APPELL ATE ORDER). 9. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRED IN HOLDING THAT INSTANCES OF ASSURANCES AND UNDERTAKINGS FOR REPAYM ENTS AS APPEARING IN THE DIARIES ARE NOT PART OF THE RUNNING ACCOUNT IN THE NAMES OF VARIOUS PERSONS MENTIONED IN THE SAID DIARIES IG NORING THE FACT THAT THE AMOUNTS MENTIONED IN SUCH ASSURANCES AND UNDERT AKINGS RE FOUND TO BE DEFINITELY RELATED TO THE AMOUNTS APPEAR ING IN THE RUNNING ACCOUNTS OF THE SAID PERSONS WHO HAD SIGNED THOSE CORRESP ONDING ASSURANCES AND UNDERTAKINGS, THE FINDING WHICH IS DISCUSSED IN DETAILED IN THE BLOCK ASSESSMENT ORDER (PARA 3.103 OF THE APPELL ATE ORDER). 10. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN HOLDING THAT THE STATEMENTS OF THE APPELLANT AND HIS RELATIV ES HAVE CLEARLY REBUTTED THE PRESUMPTION THAT THE CONTENTS OF THE DIA RIES BELONGED TO THE APPELLANT AS IT WAS WRITTEN AND FOUND IN HIS POSSESSIO N IGNORING THE FACT THAT THE AFFIDAVITS FILED BY THE RELATIVES AND F RIEND OF THE ASSESSEE ARE NOT SUPPORTED WITH ANY CONTEMPORARY EVIDENCE. 11. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERR ED IN HOLDING THAT THE SPECIFIC ENTRIES OF SUCH DOUBLING 'ARE NOT PA RT OF THE RUNNING ACCOUNT APPEARING IN THE NAMES OF VARIOUS PARTIES AND THEREFORE THE SAID ENTRIES REFLECTED SEPARATELY DULY OUTLINED IN BOX ES HAVE NO CO- RELATION WITH THE RUNNING ACCOUNTS' WITHOUT EXAMININ G THE ENTRIES OF DAMDUPPAT IN THE SEIZED DIARIES WITH REFERENCE TO THE CORRESPONDING FIGURES IN THE RESPECTIVE RUNNING ACCOUNTS (PARA 3.105 OF THE APPELLATE ORDER). 12. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN MISCONSTRUING THE FINDING GIVEN IN PARA 8.1 OF THE BL OCK ASSESSMENT ORDER BY HOLDING THAT THE INFERENCE DRAWN BY THE AO ABOUT THE MONEY LENDING TRANSACTION OF THE APPELLANT IS NOT BASED ON C ORRECT 5 APPRECIATION OF THE FACT AND EVIDENCES ON RECORD IGN ORING THE FINDING GIVEN IN THE BLOCK ASSESSMENT ORDER U/S. 158BC (PARA 3. 106 OF THE APPELLATE ORDER). 13. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN HOLDING THAT 'MR. M.H. ANDURE, MR. M.B. PATIL AND MR. MAHAJ AN HAVE SIGNED THE DIARIES AS ACKNOWLEDGEMENT OF THE TRANSACTIONS AMONG TH EMSELVES AND NOT THE APPELLANT' IGNORING THE FACT THAT THE RUNNI NG ACCOUNTS OF THESE THREE PERSONS ARE INDEPENDENT OF EACH OTHER AND THERE IS NOT A SINGLE ENTRY IN THEIR RUNNING ACCOUNTS WHICH IS COMMON AND W HICH IS REPRESENTING THE TRANSACTIONS AMONGST THEMSELVES AS HELD BY CIT(A) (PARA 3.106 OF THE APPELLATE ORDER). 14. ON THE FACTS AND IN THE CIRCUMSTANCES, C1T(A) ERRE D IN HOLDING THAT THE PERSONAL EXPENSES AS REFERRED BY THE AO IN THE ASSESSME NT ORDER DO NOT PERTAIN TO THE APPELLANT AND, THEREFORE, IT NEGATES THE FINDING THAT THE RUNNING ACCOUNT AS APPEARING IN THE ENTRIES TO THE SAID DIARIES BELONG TO THE APPELLANT IGNORING THE FINDING GIVEN IN PARA 9.11 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (P ARA 3.110 OF THE APPELLATE ORDER). 15. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN HOLDING THAT THERE IS NO REASON FOR CONSIDERING THE UDI IN THE HAND S OF THE APPELLANT FOR THE TRANSACTIONS RECORDED BY HIM ON BEHALF OF HIS RELATIVES AND FRIEND IGNORING THE FINDING GIVEN IN THE BLOCK ASSESSME NT ORDER POINTING OUT THE MODE OF MAINTENANCE OF THE DIARIES (PARA 3.111 OF THE APPELLATE ORDER). 16. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DRAWING AN INFERENCE THAT 'THE APPELLANT WAS WRITING THE DIARIE S AS AN ACCOUNTANT ON BEHALF OF THE RELATIVES AND FRIEND ENJOYING TRUSTW ORTHINESS AND FAITH REQUIRED ON SUCH LARGE TRANSACTION', IGNORING THE FIN DING GIVEN IN THIS RESPECT IN PARAS 8.2 & 8.3 OF THE BLOCK ASSESSMENT ORDER THAT THE ASSESSEE IS ENGINEERING GRADUATE, HOLDING THE GAZETTEED POST IN PUBLIC WORKS DEPARTMENT FOR SEVERAL YEARS POSTED AT SEVERAL PLA CES DURING THE RELEVANT PERIOD AND SHRI M.B. PATIL WAS THE GOVT . CONTRACTOR FOR PWD AND WAS HAVING INDEPENDENT OFFICE AND EMPLOYEES FOR MAINTENANCE OF RECORDS AND WAS ALSO HAVING SERVICES OF C HARTERED ACCOUNTANT. UNDER THESE CIRCUMSTANCES, THE INFERENCE D RAWN BY CIT(A) THAT THE ASSESSEE WROTE THE DIARIES AS AN ACCOUNTANT OF THESE PERSONS IS NOT ONLY STRANGE BUT ALSO ILLOCIAL (PARA 3.111 OF THE APPELLATE ORDER). 17. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN HOLDING THAT THE AO HAS NOT MADE ANY ENQUIRY WITH OTHER PERSONS AS T O WHETHER THE FACT MENTIONED BY SHRI M.B. PATIL IS CORRECT OR NOT IGNORING THE FACT THAT NO SUCH ENQUIRY COULD BE MADE BY THE AO DUE TO PENDE NCY OF APPLICATION OF SHRI M.B. PATIL BEFORE SETTLEMENT CO MMISSION, MUMBAI IGNORING THE FACT THAT THE ASSESSEE NEVER PRODUCED SHRI M.B. PATIL AS HIS WITNESS DURING BLOCK ASSESSMENT PROCEEDINGS IN HIS CASE (PA RA 3.112(H) OF THE APPELLATE ORDER). 18. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERR ED IN HOLDING THAT THE AO HAS TREATED THE TRANSACTIONS APPEARING IN THE SE IZED DIARIES IN THE HANDS OF THE APPELLANT WHICH IS BASED ON THE PRESUM PTION THAT THE DIARIES WERE WRITTEN BY THE APPELLANT IGNORING THE F INDING GIVEN IN THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS/DIA RIES INDICATING THE MODE OF MAINTENANCE OF DIARIES AND OW NERSHIP OF FUNDS 6 IN RESPECT OF TRANSACTIONS RECORDED IN THE SEIZED DIARI ES WHICH ARE BASED EXCLUSIVELY ON SPECIFIC ENTRIES (PARA 3.113 OF TH E APPELLATE ORDER). 19. ON THE FACTS AND IN THE CIRCUMSTANCES., CIT(A) ERR ED IN HOLDING THAT 'IN THE INSTANT CASE THERE IS ABSOLUTELY NO EVIDENCE OR MATERIAL ON RECORD TO JUSTIFY THE SOURCE OF SUCH UNACCOUNTED INVEST MENT ALLEGED TO HAVE BEEN MADE BY THE APPELLANT AND HENCE THE ADDIT ION SO MADE BY THE AO TO THIS EFFECT IS NOT SUSTAINABLE' AND THEREBY FURTHER ERRED IN GIVING A FINDING, WHICH IS INCONSISTENCE WITH THE DECI SION GIVEN BY THE C1T(A) IN RESPECT OF GROUND NO.4 (PAGE 3.113 OF THE APPELLATE ORDER). 20. ON THE FACTS AND IN THE CIRCUMSTANCES, C1T(A) ERRE D IN HOLDING THAT 'ALL THE TRANSACTIONS RECORDED IN THESE DIARIES HAVE BE EN ADMITTED AND CORRESPONDING UNDISCLOSED INCOME STAND TAXED IN THE HAN DS OF THE RESPECTIVE PERSONS' WHICH IS INCORRECT FINDING GIVEN BY THE CIT(A) BECAUSE THE BALANCE IN THE ACCOUNT OF SHRI M.B. PATI L AS PER THE DIARIES OF THE ASSESSEE IS OF RS.7,26,11,000/- AND THE INCOME OF FERED BY HIM BEFORE THE SETTLEMENT COMMISSION IS RS.98,43,737/- (PA RA 3.116 OF THE APPELLATE ORDER). 21. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.8,48,93,784/- MADE BY THE AO ON ACCOU NT OF CLOSING BAL- ANCE IN RUNNING ACCOUNT IN THE NAME OF SHRI M.B. PA TIL AND HIS ASSOCIATES IGNORING THE FINDING GIVEN IN PARA 9.1 TO 9 .5 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 3.1 25 OF THE APPELLATE ORDER). 22. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.43,07,500/- MADE BY THE AO ON ACCOUNT OF CLOSING BALANCE IN THE RUNNING ACCOUNT IN THE NAME OF SHRI M.H. ANDURE, IGNORING THE FINDING GIVEN IN PARAS 9.1 TO 9.5 OF TH E BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 4.23 OF TH E APPELLATE ORDER). 23. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.34.30,000/- MADE BY THE AO ON ACCOUNT OF INVESTMENT IN MITMITA LAND IGNORING THE FINDING GIVEN IN PARA 9.7 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 5.6 OF THE APPELLATE ORDER). 24. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.4,80,428/- MADE BY THE AO ON ACCOUNT OF INVESTMENT PADEGAON FARM IGNORING THE FINDING GIVEN IN PARA 9. 8 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 6.6 OF THE APPELLATE ORDER). 25. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.33,47,000/- MADE BY THE AO ON ACCOUNT OF INVESTMENT IN FLAT MUMBAI, ZEN CAR & RENUKA PROPERTY IGNORING THE FINDING GIVEN IN PARA 9.9 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SE IZED DOCUMENTS(PARA 7.10 OF THE APPELLATE ORDER). 26. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.5,00,000/- MADE BY THE AO ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE SHOPS IN APNA BAZAR IGNORING THE FIN DING GIVEN IN PARA 9.6 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SE IZED DOCUMENTS (PARA 8.8 OF THE APPELLATE ORDER). 7 27. ON THE FACTS AND IN THE CIRCUMSTANCES, C1T(A) ERRE D IN DELETING THE ADDITION OF RS.24,40,200/- MADE BY THE AO ON ACCOUNT OF EXPENDITURE INCURRED THROUGH THE RUNNING ACCOUNTS IN THE SEIZED D IARIES, IGNORING THE FINDING GIVEN IN PARA 9.11 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 9.10 OF THE APPELLATE O RDER). 28. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.22,82,700/- MADE BY THE AO ON ACCOUNT OF CLOSING BALANCE IN THE RUNNING ACCOUNT IN THE NAME OF SHRI GANGADHAR MAHAJAN, IGNORING THE FINDING GIVEN IN PARAS 9.1 TO 9.5 OF TH E BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 9.11 TO 9. 13 OF THE APPELLATE ORDER). (29) ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ER RED IN DELETING THE ADDITION OF RS.35,72,000/- MADE BY THE AO ON ACCOUNT OF INVESTMENTS INCURRED THROUGH THE RUNNING ACCOUNTS IN THE SEIZED D IARIES, IGNORING THE FINDING GIVEN IN PARA 9.11 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 9.13 OF THE APPELLATE ORDER ). 30. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.2,00,000/- MADE BY THE AO ON ACCOUNT OF CLOSING BALANCE OF RS.1 LAKH EACH IN THE RUNNING ACCOUNT IN THE NAME OF SHRI RENU MAHAJAN AND SHRI SANJAY MAHAJAN IGNORING THE FINDIN G GIVEN IN PARAS 9.1 TO 9.5 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS(PARA 9.11 TO 9.13 OF THE APPELLATE ORDER). 31. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.66,00,000/- MADE BY THE AO ON ACC OUNT OF CLOSING BALANCE IN THE RUNNING ACCOUNT IN THE NAME OF SHRI P.B. MAHAJAN, IGNORING THE FINDING GIVEN IN PARAS 9.1 TO 9.5 OF TH E BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS(PARA 3.125 OF TH E APPELLATE ORDER). 32. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN DELETING THE ADDITION OF RS.12,50,000/- MADE BY THE AO OUT OF TOTAL ADDITION OF RS.52,58,000/- MADE ON ACCOUNT OF COST OF CONSTRUCTION OF OSMANPURA HOUSE IGNORING THE FINDING GIVEN IN PARA 9.6 OF THE BLOCK ASSESSMENT ORDER ON THE BASIS OF SEIZED DOCUMENTS (PARA 4.23 OF TH E APPELLATE ORDER). 33. ON THE FACTS AND IN THE CIRCUMSTANCES, CIT(A) ERRE D IN GIVING SET- OFF OF AMOUNT OF RS.12,50,000/- AGAINST THE ADDITION OF RS.52,58,000/- MADE ON ACCOUNT OF COST OF CONSTRUCTION OF OSMANPURA H OUSE (PARA 4.23 OF THE APPELLATE ORDER). 34. ON THE FACTS AND IN THE CIRCUMSTANCES, THE CIT(A) ERRED IN DELETING THE SURCHARGE LEVIED ON THE TAX ON UNDISCLOSE D INCOME. 35. THE ORDER OF CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. IN GROUNDS OF APPEAL NO.1 TO 22, THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 9,82,83,984/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ENTRIES IN T HE SEIZED DIARIES AS ADVANCES GIVEN BY THE ASSESSEE TO SHRI M.B. PATIL, SHRI M.H. ANDURE, SHRI P.B. MAHAJAN AND VARIOUS OTHER PERSONS. 8 4.1 THE FACTS LEADING TO THE ABOVE GROUNDS ARE THAT DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE SEIZED FROM THE RE SIDENCE OF THE ASSESSEE AS WELL AS FROM THE RESIDENTIAL PREMISES O F SHRI M.B. PATIL, A GOVT. CONTRACTOR AND THE RELATIVES OF THE ASSESSEE AS PER PARA 2 OF THE IMPUGNED ORDER. THE ACCOUNTS OF SHRI M.B. PATIL WE RE FOUND RECORDED IN THE DIARIES INVENTORISED AS A-67,A-68 AND A-71, SEIZED FROM THE RESIDENCE OF THE ASSESSEE SHRI N.H. JALKOTE. THE A SSESSING OFFICER OBSERVED THAT SHRI M.B. PATIL, IN HIS STATEMENT RE CORDED U/S.131 HAD STATED THAT ALL THE TRANSACTIONS IN THE 3 SEIZED DI ARIES FROM THE RESIDENCE OF SHRI N.H. JALKOTE ARE IN RESPECT OF HIS CONTRACT BUSINESS AND HIS ASSOCIATE CONCERNS AND THAT THE GROSS CONTRACT RECE IPTS OF SUCH CONTRACT WORK DONE BY THEM WERE RECORDED BY SHRI N.H. JALKOT E IN THE SAID DIARIES. IT WAS FURTHER CLAIMED BY SHRI M.B PATIL THAT SOME OF SUCH CONTRACTS WERE GIVEN AS SUB-CONTRACTS TO SEVERAL PE RSONS INCLUDING SHRI M.H. ANDURE AND SHRI MAHAJAN WHOSE NAMES ALSO APPEA R IN THE SAID DIARIES. THE ASSESSING OFFICER NOTED THAT THE ASSE SSEES OF SHRI M.B. PATIL GROUP HAVE FILED SETTLEMENT PETITIONS BEFORE THE SETTLEMENT COMMISSION, MUMBAI AND THEY ARE ADMITTED U/S.245D(1 ) ON 12-08- 2003. HE NOTED THAT SHRI M.B. PATIL AND SHRI B.B. PATIL HAVE CLAIMED DURING SEARCH AS WELL AS DURING THE PROCEEDINGS THE REAFTER THAT THE TRANSACTIONS IN THE SAID 3 DIARIES OF SHRI N.H. JAL KOTE ARE IN RESPECT OF THE GROSS CONTRACT RECEIPTS OF THE GROUP FOR THE CO NTRACT WORK DONE BY THEM OUTSIDE THE BOOKS OF ACCOUNTS AND THAT SOME OF THE SAID CONTRACTS WERE GIVEN AS SUB-CONTRACT TO SHRI M.H. ANDURE, MR. PRASHANT B. MAHAJAN AND TO OTHER PERSONS WHOSE NAMES APPEAR IN THE DIARIES. THOSE PERSONS HAVE DISCLOSED INCOME @8% ON GROSS CO NTRACT RECEIPTS 9 FOR THE WORK DONE BY THEMSELVES AND 5% ON SUB-CONTR ACT RECEIPTS. THE ASSESSING OFFICER OBSERVED THAT INSPITE OF THE ELAB ORATE SUBMISSIONS OF SHRI M.B. PATIL RECORDED DURING POST SURVEY PROCEED INGS HE WAS NOT ABLE TO SPECIFY THE EXACT NATURE OF CONTRACT WORK, EXACT SITE OF THE CONTRACT, EXACT DEPARTMENTS AND AUTHORITIES TO WHOM THE TENDERS WERE FILED AND FROM WHOM THE CONTRACTS WERE OBTAINED, TH E DETAILS OF EXPENDITURE INCURRED FOR EXECUTION OF SUCH CONTRACT WORK FOR WHICH THE GROSS RECEIPTS ARE CLAIMED TO HAVE BEEN RECORDED IN THE SEIZED DIARIES OF SHRI N.H. JALKOTE. SHRI M.B. PATIL WAS UNABLE TO E XPLAIN AND PROVE AS TO WHETHER AND IN WHICH BANK ACCOUNT THE GOVERNMENT CHEQUES IN RESPECT OF SUCH CONTRACT RECEIPTS WERE CREDITED. S IMILARLY, SHRI M.B. PATIL WAS UNABLE TO PRODUCE THE OTHER PERSONS LIKE DUTTA, GOSALWAD, CHOUBE ETC. WHOSE NAMES APPEAR IN THE SAID DIARIES OF THE ASSESSEE AND WHO WERE CLAIMED TO BE THE ALLEGED SUB-CONTRACTORS OF SHRI M.B. PATIL. NO SUCH CONFIRMATIONS WERE ALSO PRODUCED FROM THESE PERSONS. SHRI M.B. PATIL WAS UNABLE TO EXPLAIN SATISFACTORILY AS TO WHY THE PERSONAL EXPENSES OF SHRI N.H. JALKOTE WERE DEDUCTED FROM TH E RECORD OF GROSS CONTRACT RECEIPTS AND THE WORK DONE BY HIS GROUP. HE WAS ALSO UNABLE TO EXPLAIN AS TO WHY THE TRANSACTIONS IN RESPECT OF THE INVESTMENT OF SHRI N.H. JALKOTE IN FLAT AT MUMBAI, ZEN CAR AND LOANS W ERE DEDUCTED FROM THE GROSS CONTRACT RECEIPTS OF HIS GROUP RECORDED I N THE SAID DIARIES. HE WAS ALSO UNABLE TO EXPLAIN AS TO WHY THE INVESTMENT S OF SHRI M.H. ANDURE AND OF SHRI PRASHANT B. MAHAJAN WERE RECORDE D IN THE DIARIES WHICH WERE MAINTAINED FOR THE GROSS CONTRACT RECEIP TS OF HIS GROUP. SHRI M.B. PATIL WAS UNABLE TO EXPLAIN AS TO WHY HE HAD S IGNED THE ENTRIES AS APPEARING IN THE SAID DIARIES. HE, THEREFORE, WAS OF THE OPINION THAT THE 10 CLAIM OF SHRI M.B. PATIL THAT THE FIGURES IN THE SE IZED DIARIES OF THE ASSESSEE ARE THE GROSS CONTRACT RECEIPTS OF SHRI M. B. PATIL GROUP IS NOT PROVED. 4.2 IN THE LIGHT OF THE ABOVE BACKGROUND, THE ASSES SING OFFICER HELD THAT THE ASSESSEE HAD ADVANCED HIS OWN UNACCOUNTED FUNDS TO SHRI M.B. PATIL FROM TIME TO TIME. HE NOTED THAT THE CLOSING BALANCE IN THE ACCOUNT OF SHRI M.B. PATIL AS ON THE DATE OF SEARCH IS AT RS.7,26,11,000/- AS APPEARING ON PAGES 24 AND 25 OF THE SEIZED DIARY NO.A-67 AND IT IS SIGNED BY SHRI M.B. PATIL IN TOKEN OF AUTHENTICITY OF THE BORROWING MADE BY HIM. HE, THEREFORE, HELD THAT THIS ADVANCE OF RS.7,26,11,000/- IS THE UNDISCLOSED AND UNEXPLAINED INVESTMENT OF TH E ASSESSEE. HE ACCORDINGLY TAXED THE SAME IN THE HANDS OF THE ASSE SSEE AS HIS UNDISCLOSED INCOME ON SUBSTANTIVE BASIS. 4.3 THE ASSESSING OFFICER SIMILARLY NOTED FROM THE SEIZED DIARIES THAT ON THE DATE OF SEARCH THE ACCOUNT OF SHRI M.H. ANDU RE APPEARING IN THE DIARIES OF THE ASSESSEE SHOWS BALANCE OF RS.53,07,5 00/- OUT OF WHICH RS.5 LAKHS WERE ADDED TWICE ON PAGES A-71/22 AND P- 67/5 (OL) FOR ACCRUED INTEREST UPTO 16-10-2003 WHICH FALLS BEYOND THE BLOCK PERIOD. AFTER EXCLUDING THE ELEMENT OF ACCRUED INTEREST, HE OBSERVED THAT THE CORRECT BALANCE IS RS.43,07,500/-. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND AFTER CONSIDERING THAT TH E SAID AMOUNT HAS BEEN OFFERED BY SHRI M.H. ANDURE AS HIS UNDISCLOSED INCOME, THE ASSESSING OFFICER TAXED THE SAME AS INCOME OF THE A SSESSEE ON SUBSTANTIVE BASIS AND SEPARATELY TAXED THE SAME IN THE HANDS OF SHRI M.H. ANDURE ON PROTECTIVE BASIS. 11 4.4 THE ASSESSING OFFICER FURTHER OBSERVED THAT SHR I PRASHANT MAHAJAN IS THE BROTHER-IN-LAW OF THE ASSESSEE AND S HRI B.B. MAHAJAN IS THE FATHER-IN-LAW OF THE ASSESSEE. HE OBSERVED THA T SHRI PRASHANT MAHAJAN HAD ADMITTED IN ANSWERS TO QUESTION NO.22 T O 25 OF HIS STATEMENT RECORDED U/S.132(4) THAT HE HAD BORROWED RS.64 LAKHS FROM THE ASSESSEE SHRI N.H. JALKOTE FROM TIME TO TIME AS PER THE ENTRIES APPEARING IN THE RUNNING ACCOUNT IN THE NAME OF SHR I B.B. MAHAJAN IN THE SEIZED DIARIES OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT SHRI B.B, MAHAJAN HAD ADMITTED THAT HE HAD SIGNED T HE RELEVANT ENTRIES AND PAGES OF THE SAID DIARIES SEIZED FROM THE RESID ENCE OF THE ASSESSEE. SHRI PRASHANT MAHAJAN HAD FURTHER GIVEN THE DETAILS OF VARIOUS INVESTMENTS MADE BY HIM WITH THE HELP OF SUCH BORRO WINGS. HOWEVER, THIS PART OF THE STATEMENT WAS SUBSEQUENTLY RETRACT ED BY SHRI MAHAJAN. THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS SHRI PRASHANT MAHAJAN HAD DENIED TO HAV E BORROWED ANY FUNDS FROM THE ASSESSEE. HOWEVER, THE ASSESSING OF FICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AS WELL AS OF SRI B. B. MAHAJAN AND SHRI PRASHANT MAHAJAN. AFTER NOTING THAT THE CLOSING BALANCE IN THE ACCOUNT OF SRI B. B. MAHAJAN AND SHR I PRASHANT MAHAJAN ON THE DATE OF SEARCH IS RS.64 LAKHS AS APPEARING O N PAGE 13 OF THE SEIZED DIARY, WHICH IS SIGNED BY BOTH OF THEM IN TO KEN OF AUTHENTICITY OF THE BORROWING MADE BY HIM, THE ASSESSING OFFICER TR EATED THE SAME AS UNDISCLOSED AND UNEXPLAINED INVESTMENT OF THE ASSES SEE. HE ACCORDINGLY TAXED THE SAME IN THE HANDS OF THE ASSE SSEE ON SUBSTANTIVE BASIS. SINCE SHRI PRASHANT MAHAJAN HAD DECLARED TH E AMOUNT IN THE RUNNING ACCOUNT AS HIS UNDISCLOSED INCOME IN THE ST ATEMENT RECORDED 12 U/S.132(4), THE ASSESSING OFFICER SEPARATELY TAXED THE SAME IN THE HANDS OF SHRI PRASHANT MAHAJAN ON PROTECTIVE BASIS. 4.5 THE AO OBSERVED THAT THE ACCOUNT OF SHRI GANGAD HAR MAHAJAN APPEARS ON PAGE 5 OF ANNEXURE-6 SEIZED FROM THE RES IDENCE OF THE ASSESSEE. THE SAME ACCOUNT ALSO BEARS ON PAGE 12 O F DIARY A-71 AND AGAIN ON PAGE 12 OF DIARY A-67. THE SAME ENTRIES A RE REPEATED AT 3 PLACES. THIS ACCOUNT SHOWS THE OPENING BALANCE OF 23.02 LAKHS AS ON 29-01-1997 AND CLOSING BALANCE OF RS.22,82,700/- AS ON 27-07-1997 OUTSTANDING TILL THE DATE OF SEARCH. HE NOTED THAT THE ACCOUNT OF PAGE 5 OF ANNEXURE-68 AND ON PAGE 12 OF ANNEXURE A-71 I S SIGNED BY SHRI GANGADHAR MAHAJAN AS WELL AS SHRI M.H. ANDURE. THERE IS ALSO AN UNDERTAKING FOR REPAYMENT OF RS.23 LAKHS APPEARI NG ON PAGE 13 (OL) OF A-71 SIGNED BY SHRI GANGADHAR MAHAJAN AND S HRI M.H. ANDURE ON 24-10-1998. IN VIEW OF THIS SIGNATURE AP PEARING THERE SHRI M.H. ANDURE SURRENDERED THE AMOUNT OF RS.23.02,000/ - AS HIS UNDISCLOSED INCOME IN HIS ANSWER TO QUESTION NO.56 AND 63 OF HIS STATEMENT RECORDED U/S.132(4). HOWEVER, DURING THE BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI M.H. AND URE HE REVISED THE FIGURE OF RS.22,82,700/- BEING CLOSING BALANCE ON THE ACCOUNT OF SHRI GANGADHAR MAHAJAN. 4.6 THE AO ANALYSED THE DETAILS OF THE ENTRIES IN T HE SAID DIARY AND OBSERVED THAT SHRI GANGADHAR MAHAJAN HAS BEEN PAID FOR VARIOUS INVESTMENTS BY THE MEMBERS OF THE JALKOTE FAMILY, T HE DETAILS OF WHICH ARE AS UNDER : 13 RS.80,000/- PAID FOR MAGANPUR PLOT RS.17 LAKHS ADVANCE FOR CRUSHER BUSINESS RS. 7 LAKHS LAND RELEASED FROM D.R. DESHMUKH RS.22,80,000/- TOTAL HE OBSERVED THAT THE FIGURE OF RS.22,80,000/- APPEA RING AS PAID TO SHRI GANGADHAR MAHAJAN ON VARIOUS ACCOUNTS RECONCIL ES WITH THE FIGURES OF RS.22,82,700/- APPEARING IN THE RUNNING ACCOUNT OF SHRI GANGADHAR MAHAJAN IN THE DIARIES OF THE ASSESSEE. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE SOURCE FOR THE AD VANCE OF RS.22,82,700/-. THE ASSESSEE DENIED TO HAVE ADVANC ED ANY SUCH AMOUNT TO SHRI GANGADHAR MAHAJAN EITHER BY HIMSELF OR BY HIS FATHER. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE AND OBSERVING THAT SUCH EVIDENCES WERE SEIZED FROM THE RESIDENCE OF THE ASSESSEE HE TAXED THE SAME AS THE UNDISCLOSED FUNDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. HOWEVER, CONSIDERING THE FAC T THAT SHRI M.H. ANDURE HAD DECLARED THE AMOUNT OF RS.22,82,700/- AP PEARING IN THE RUNNING ACCOUNT OF SHRI GANGADHAR MAHAJAN AS HIS UN DISCLOSED INCOME DURING THE BLOCK ASSESSMENT PROCEEDINGS, HE SEPARATELY TAXED THE SAME IN THE HANDS OF SHRI M.H. ANDURE ON PROTEC TIVE BASIS. 4.7 THE AO FURTHER NOTED THAT THE DIARIES SEIZED FR OM THE RESIDENCE SHOWS ADVANCES MADE BY THE ASSESSEE TO SEVERAL PERS ONS AND THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCE OF THE SA ME. THE TOTAL ADVANCES INCLUDING THE ADVANCES GIVEN TO SHRI M.H. ANDURE, SHRI B.B. MAHAJAN, SHRI P. B. MAHAJAN, SHRI M.B. PATIL A ND SHRI GANGADHAR MAHAJAN COME TO RS.9,82,83,984/-, THE DET AILS OF WHICH ARE AS UNDER : 14 BLOCK ASSESSMENT ORDER U/S.158BC R.W.S. 143(3) IN THE CASE OF SHRI N.H. JALKOTE (REFER PARA 9.5) LIST OF ADVANCES MADE TO VARIOUS PERSONS AS RECORDED IN THE DIARIES MARKED NO. A-67, A-68 & A-71 SEIZED FROM THE RESIDENCE OF SHRI NH. JALK OTE. AMOUNT OF ADVANCES OUTSTANDING AS ON THE DATE OF SEARCH SL.NO. NAME OF THE PERSON TO WHOM ADVANCES GIVEN DIARY NO. PAGE NO. CLOSING BALANCE AS ON 21-11- 2001 RUPEES 1 SHRI B.B. MAHAJAN (REFER PARA 9.2) A-67 13 6400000 2 SHRI CHANDRALAL AURADE A-67 22 55000 3 SHRI DEVDATTA (CORRECTED) A-67 16 30000 4 SHRI DHABADWAR A-67 15 250000 5 SHRI DIGA A-68 13 2537000 6 SHRI D.R. DESHMUKH (LATUR) A-67 14 500000 7 SHRI FHADNIS A-68 14 50000 8 SHRI GANGADHAR MAHAJAN (REFER PARA 9.4) A-68 5 2282700 9 SHRI GOSALWAD DS) A-67 10 3360784 10 SHRI HANUMANTRAO MALGE A-67 11 100000 11 SHRI KANTIKAR A-71 4 200000 12 SHRI MAHADAPPA ANDURE (CORRECTED) A-63 23(OL) 4307500 13 REFER PARA 9.1) 14 SHRI M.B. PATIL (REFER PARA 9.3) A-67 24 72611000 15 SHRI KAMAL PARKHI A-67 22(OL) 50000 16 SHRI NARSINGH A-71 9(OL) 225000 17 SHRI PATHADE SHEKH A-67 21 682000 18 SHRI P.B. PATIL A-67 22(OL) 25000 19 SHRI PRASHANT MAHAJAN (CAR ADVANCE) A-67 26(OL) 200000 20 SMT. RENU MAHAJAN A-71 9 100000 21 SHRI SANJAY MAHAJAN A-71 9 100000 22 SHRI SATISH DESHMUKH LATUR A-71 9 400000 23 SHRI S.B. TANSEKAR A-67 15 500000 24 SHRI SHAKKARWAR A-67 22 300000 25 SHRI SWAMI CHOBE A-67 17 3018000 GRAND TOTAL RS.9,82,83,984 THE AO ACCORDINGLY MADE ADDITION OF RS.9,82,83,984/ - TO THE TOTAL INCOME OF THE ASSESSEE AS HIS UNDISCLOSED INCOME. 5. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAD CATEGORICALLY STATED DURING THE SEARCH, POST SEARCH AND BLOCK ASSESSMENT PROCEEDINGS THAT HE WAS RECORDING THE TR ANSACTIONS IN THE DIARIES SEIZED FROM HIS RESIDENCE, WHICH CONTAIN TH E TRANSACTIONS OF SHRI M.B. PATIL GROUP, AS THE SAID GROUP WAS HAVING BUSINESS 15 TRANSACTIONS WITH SHRI M.H. ANDURE, SHRI P.B. MAHAJ AN AND SHRI BALIRAM MAHAJAN. THE ASSESSEE HAD ALSO FILED AFFID AVITS ETC SOON AFTER THE SEARCH AND ALSO DURING THE BLOCK ASSESSME NT PROCEEDINGS. IT WAS SUBMITTED THAT SHRI M.B. PATIL GROUP HAVE FILED SETTLEMENT PETITIONS BEFORE THE HONBLE SETTLEMENT COMMISSION WHICH HAS BEEN ADMITTED U/S.245D(1) OF THE I.T. ACT AND ORDER OF A DMISSION HAS BEEN PASSED ON 19-08-2003, I.E. BEFORE THE BLOCK ASSESSM ENT ORDER. 5.1 IT WAS SUBMITTED THAT SHRI M.B. PATIL GROUP HAD ADMITTED BEFORE THE SETTLEMENT COMMISSION THAT ALL FINANCIAL TRANSA CTIONS ENTERED IN THE DIARIES SEIZED FROM THE RESIDENCE OF THE ASSESS EE PERTAINING TO HIS GROUP ARE CONTRACT RECEIPTS AND THEY ARE LIABLE FOR THE SAME. IT WAS SUBMITTED THAT IN RESPONSE TO THE NOTICE U/S.158BC THE RELATIVES OF THE ASSESSEE NAMELY SHRI M.H. ANDURE, SHRI P.B. MAHAJAN , SHRI BALIRAM MAHAJAN HAVE FILED BLOCK RETURNS DECLARING THE UNDI SCLOSED BUSINESS INCOME AND INVESTMENTS IN MOVABLE AND IMMOVABLE PRO PERTIES DULY OWNED BY THEM. IT WAS ARGUED THAT THE ABOVE PERSON S HAVE FIRMLY STATED THAT ALL THESE DIARIES BELONG TO THEM AND TH EY ARE THE ONLY PERSONS WHO HAVE TO FACE THE CONSEQUENCES OF THE SA ME. 5.2 IT WAS SUBMITTED THAT THE MAHARASHTRA STATE ANT I CORRUPTION BUREAU HAS CONDUCTED DISCRETE ENQUIRY AGAINST THE A SSESSEE REGARDING THE ALLEGATIONS ABOUT THE ACQUISITION OF DISPROPORT IONATE ASSETS BY THE ASSESSEE AND HIS FAMILY MEMBERS AND NO OFFENCE WAS REGISTERED AND THIS ENQUIRY WAS CLOSED IN MARCH 2001. IT WAS STAT ED THAT THE ANTI CORRUPTION BUREAU HAD COLLECTED THE COPIES OF THE S EIZED MATERIALS INCLUDING DIARIES BEARING NOS. A-67, A-68 AND A-71 AND ALSO COPIES OF STATEMENTS RECORDED U/S.132(4) AND 131 OF THE AS SESSEE AND HIS 16 RELATIVES SHRI M.H. ANDURE, SHRI P.B. MAHAJAN AND H IS FRIEND SHRI M.B. PATIL DIRECTLY FROM THE ACIT(CENTRAL), AURANGA BAD IN THE MONTH OF FEBRUARY 2003. AFTER EXAMINING THE SAID PAPERS/S TATEMENTS A REPORT WAS SENT TO DIRECTOR GENERAL, ANTI CORRUPTION BUREA U, MUMBAI. AFTER EXAMINING ALL THESE PAPERS AND REPORTS THE EN QUIRY WAS CLOSED IN MARCH 2003, I.E. BEFORE THE DATE OF BLOCK ASSESS MENT YEAR IN QUESTION. 5.3 IT WAS SUBMITTED THAT THE AO WITHOUT CONSIDERIN G THE VARIOUS SUBMISSIONS MADE DURING THE COURSE OF BLOCK ASSESSM ENT PROCEEDINGS REGARDING OWNERSHIP OF VARIOUS ASSETS STANDING IN T HE NAMES OF RELATIVES AND FRIENDS OF THE ASSESSEE MADE THE ADDI TION IN THE HANDS OF THE ASSESSEE. IT WAS ARGUED THAT THE REAL OWNERS O F THE DIARIES HAVE AT EVERY POINT ACCEPTED THE FACT THAT ALL FINANCIAL TR ANSACTIONS RECORDED IN THE SAID DIARIES PERTAIN TO THEM AND THE SAME REPRE SENT THEIR INCOME/INVESTMENT AND NOT OF THE ASSESSEE AND THEY ARE RESPONSIBLE FOR PAYING TAX THEREON AND THEY HAVE ACTUALLY ACTED ACCORDINGLY BY CONSIDERING THE SAID TRANSACTIONS IN THEIR BLOCK RE TURNS. SIMILARLY SHRI M.B. PATIL GROUP HAVE ADMITTED BEFORE THE SETTLEMEN T COMMISSION REGARDING THE OWNERSHIP OF THE TRANSACTIONS RELATIN G TO THEM FOUND IN THE DIARIES. IT WAS STATED BEFORE THE AO TIME AND AGAIN THAT THE ASSESSEE WAS RECORDING THE TRANSACTIONS ON THEIR IN STRUCTIONS. 5.4 THE FOLLOWING FACTS WERE ALSO BROUGHT TO THE NO TICE OF THE LD.CIT(A) : 1. MR. M.H. ANDURE IN HIS STATEMENT U/S.132(4) AND 131 REC ORDED BY THE INCOME TAX OFFICERS AND ALSO IN HIS AFFIDAVITS HE HAS CATEGORICALLY STATED NATURE OF THE BUSINESS IN WHICH HE IS E NGAGED THAT SHOP NO.101 AT APNA BAZAR OWNED BY HIM, HOUSE ON PLOT NO.6 AT OSMANPURA WAS CONSTRUCTED BY HIM AND SUBSEQUENTLY SOLD TO TH E 17 APPELLANT. HE HAS ALSO EXPLAINED IN THE SAID STATEMENTS THE SITUATION IN WHICH THE APPELLANT HAS WRITTEN THE DIARIES AND HAS ALSO ACCEPTED THE OWNERSHIP OF TRANSACTIONS AND RESPONSIBILITY TO EXPLAI N ALL TRANSACTIONS RECORDED IN THE SEIZED DIARIES. HE HAS ALSO E XPLAINED NATURE OF BUSINESS RELATIONSHIP WITH M.B. PATIL GROUP. IN T HE AFFIDAVITS DT.23-12-2001 & 12-11-2003 HE HAS STATED THAT HE WAS DOING SOME CONTRACTORSHIP BUSINESS AND HE WAS HAVING FINANCIAL TRANSACTIO NS WITH MR. MAHAJAN & MR. M. B. PATIL GROUP. AND MR. JALKOT E BEING SENIOR WELL EDUCATED MEMBER FROM HIS FAMILY A REQUEST WAS MADE TO HIM TO LOOK TOWARDS OUR FINANCIAL TRANSACTIONS AND MAINTAIN THE RECORDS FOR THEM. THIS WORK WAS HANDED OVER TO MR. JALKOTE CONSIDERIN G THE FACT THAT IF ANY DISPUTE ARISES IN FUTURE ABOUT FINANCIAL TRANSACTIO NS BETWEEN MR. MAHAJAN AND MR. PATIL GROUPS, MR. JALKOTE WILL BE I N A BETTER POSITION TO SOLVE THE SAID DISPUTE, AS HIS WORDS ARE ACCEPTABLE TO ALL OF THEM. II. MR. PRASHANT MAHAJAN IN HIS STATEMENT RECORDED U/S 132 (4) OF THE INCOME TAX ACT 1961 HAS ACCEPTED THE FACT THAT THE T RANSACTION OF RS. 64.00 LACS BELONG TO HIM AND THIS IS NOT A LOAN FROM M R. JALKOTE AND THE SAID RS. 64.00 LACS IS HIS INCOME, AND HE HAS ALSO EXPLA INED THAT VARIOUS TRANSACTIONS RECORDED IN THE SAID DIARIES REGARDING RENUKA BUNGALOW, APNA BAZAR SHOP, PADEGAON LAND ETC. BELONGS TO HIM AND HE HAS ACCEPTED THE RESPONSIBILITY OF THE SAME. IN AFFIDAVIT DT. 27 .12.2001 HE HAS CATEGORICALLY EXPLAINED AND STATED THAT HE WAS DOIN G CONTRACTORSHIP BUSINESS WITH MR. ANDURE AND THE SITUATION IN WHICH THE APPELLANT HAS WRITTEN DIARIES ON THEIR BEHALF, AND HE HAS ALSO AC CEPTED THE RESPONSIBILITY OF FINANCIAL TRANSACTIONS RECORDED IN THE SAID DIAR IES. III. MR. BALIRAM B.MAHAJAN IN HIS STATEMENT RECORDE D U/S 131 OF THE INCOME TAX ACT, 1961 HAS CATEGORICALLY STATED AND ACCEPTED THAT THE SITUATION IN WHICH THE APPELLANT HAS WRITTEN THE SAI D DIARIES AND HAS ALSO ACCEPTED THAT ENTRIES IN THE SAID DIARIES BELONGS T O HIS SON MR.PRASHANT MAHAJAN. IV. MR. M.B.PATIL IN HIS STATEMENT RECORDED U/S 131 O F INCOME TAX ACT, 1961 AND ALSO IN AFFIDAVIT 1.11.2003 FILED BY HIM HAS ACCEPTED THAT WHATEVER FINANCIAL TRANSACTIONS RECORDED IN THE DIA RIES WRITTEN IN THE HANDWRITING OF THE APPELLANT AND SEIZED FROM THE RE SIDENCE OF THE APPELLANT PERTAINS TO HIM AND HIS GROUP AND HE ACCE PT THE OWNERSHIP AND RESPONSIBILITY OF THE SAID TRANSACTIONS. V. MR. M. B. PATIL & HIS GROUP HAS ALSO ACCEPTE D THE FACT IN PETITION FILED BY THEM BEFORE THE HON. SETTLEMENT COMMISSION THAT ALL TRANSACTIONS RECORDED IN DIARIES FOUND AT THE RESIDENCE OF THE A PPELLANT ARE THEIR CONTRACT RECEIPTS AND SAME HAS BEEN CONSIDERED IN S ETTLEMENT PETITION ADMITTED ON 12/08/2003. VARIOUS INFIRMITIES IN THE ORDER OF THE AO WERE BRO UGHT TO THE NOTICE OF THE CIT(A). 6. BASED ON THE SUBMISSIONS MADE BY THE ASSESSEE TH E LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONF RONTING THE SAME 18 TO THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION OF RS.9,82,83,984/- FROM THE HANDS OF THE ASSESSEE BY OBSERVING AS UNDE R : 3.90 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR , THE REMAND REPORT OF THE AO AND THE REJOINDER OF THE SAME. FUR THER THE SEIZED DOCUMENTS FROM THE PREMISES OF THE APPELLANT IN ORIGIN AL WERE PRODUCED AND EXAMINED DURING THE COURSE OF APPELLATE PROCEEDINGS AS ALSO THE DOCUMENTS SUBMITTED BY THE APPELLANT IN THEIR PAPER BOOK FILED ON DIFFERENT DATES. AFTER CONSIDERING THE ARGUMENT OF THE APPELLANT AND THE COUNTER ARGUMENT OF THE AO PRESENT IN THE APPELL ATE PROCEEDINGS ON GR. NO. 1 & 2 I AM OF THE VIEW THAT THERE ARE 2 VIT AL QUESTIONS THAT NEEDS TO BE ANSWERED NAMELY: I) WHETHER THE ENTRY OF TRANSACTIONS APPEARING IN DIA RY NO. A-67, 68 & A-71 WRITTEN AND FOUND AT THE PREMISES OF THE AP PELLANT BELONGED TO HIM ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE ? II) WHETHER THERE ARE SUFFICIENT EVIDENCES AVAILABLE ON RECORD TO PROVE THAT THE RUNNING ACCOUNT IN THE NAME OF SHRI M.H. ANDURE, SHRI P.B. MAHAJAN, SHRI BALIRAM MAHAJAN AND SHRI M.B. PA TIL AND HIS ASSOCIATES APPEARING IN THE SEIZED DIARIES BELONGED TO T HE APPELLANT? 3.91 IN THIS CASE THE CARDINAL ISSUE IS THE OWNERSHIP OF ENTRY MADE IN THE SAID DIARIES A-67, A-68 AND A-71 WHICH HAVE BEEN WRITTEN AND FOUND FROM THE POSSESSION OF THE APPELLANT. THE AO HAS C ONSIDERED IN PARA 8(II) OF HIS ASSESSMENT ORDER THAT AS THESE DIARIES WE RE FOUND FROM THE PERSONAL CUSTODY OF THE APPELLANT AND FROM HIS RESI DENCE AND WERE WRITTEN IN HIS HAND WRITING AND ALSO THE SAME WERE MAI NTAINED METICULOUSLY AND SIGNED BY THE PARTIES. THUS, THE AMOUN TS INVOLVED IN THE TRANSACTIONS MENTIONED IN THESE DIARIES WERE HELD A S UNDISCLOSED ADVANCES OF THE APPELLANT. THE AO HAS ALSO PRESUMED THA T AS SHRI M.B.PATIL AND SHRI P.B. MAHAJAN AND SHRI M.H. ANDUR E HAS SIGNED ON CERTAIN PAGES OF THE DIARY WHICH SHOW THE UNDERTAKING GIVEN BY THESE PERSONS FOR REPAYMENT OF THE FUNDS ORROWED BY THEM. THE AO HAS ALSO GIVEN EMPHASIS ON THE STATEMENT OF SHRI P.MAHAJAN WHO HAD AT ONE TIME ACCEPTED THAT HE HAD BORROWED AN AMOUNT OF RS.64 LAK HS FROM THE APPELLANT THOUGH THIS FACT HAS BEEN CORRECTED BY SHRI MAHAJAN HIMSELF IN THE SAME STATEMENT RECORDED U/S 132(4) OF THE INCOM E TAX ACT, 1961 ON 23-11-2001. THE AO HAS ALSO REFERRED TO THE TRANSAC TIONS OF SHRI M.H ANDURE IN RESPECT OF PURCHASE OF HOUSE PROPERTY AT OSMA NPURA AND OTHER ASSETS PURCHASED / CONSTRUCTED FOUND MENTIONED IN THE DIARIES. THE AO HAS MENTIONED THAT SHRI M.B.PATIL THOUGH HE H AS ACCEPTED THE TRANSACTIONS RECORDED IN THESE DIARIES AS CONTRACT RECE IPTS, HE WAS NOT ABLE TO PROVE THE RUNNING ACCOUNT OF SHRI M.B.PATIL AS APPEARING IN THE DIARY OF THE APPELLANT AS CONTRACT RECEIPTS. ON THESE FACTS, THE AO HAS HELD THAT THE FUNDS INVOLVED IN THESE TRANSACTIONS RECO RDED IN THE SAID THREE DIARIES ARE PERTAINING TO THE APPELLANT ONLY. 3.92 IT CAN THUS, BE OBSERVED THAT THE AO HAS PROCEED ED TO HOLD THAT THE TRANSACTIONS APPEARING IN THE DIARIES A-67, A-68 AND A-71 BELONGED TO THE APPELLANT ESSENTIALLY ON THE PRESUMPTION THAT T HE SAID DIARIES WERE WRITTEN AND FOUND TO BE IN HIS POSSESSION DURING CO URSE OF SEARCH OPERATIONS. THE SO CALLED PRESUMPTION HAS TO BE EXAMINE D IN TOTALITY BY CONSIDERING THE PREVAILING CIRCUMSTANCES AND OTHER EVI DENCES AVAILABLE TO SUPPORT SUCH PRESUMPTION. THEREFORE, IT FOLLOWS THAT THE PRESUMPTION 19 SO ACQUIRED BY THE AO ARE REBUTTABLE, IF THERE ARE E VIDENCES WHICH PROVE CONTRARY TO SUCH FINDINGS. IN THIS CONTEXT IT IS PERTI NENT TO APPRAISE THE CIRCUMSTANCES UNDER WHICH THE SAID DIARIES WERE WRITTEN BY THE APPELLANT IN THE NAME OF HIS RELATIVES AND FRIEND. TH E APPELLANT HAS STATED IN HIS STATEMENT RECORDED DURING SEARCH ITSELF HA S EXPLAINED THE REASON OF WRITING AND KEEPING THE DIARIES WITH HIM. ( QUESTION ON PAGE NO. 18 TO 21 OF STATEMENT OF APPELLANT DATED RECORD ED ON 22-11-2001). IT IS OBSERVED FROM THE SAID STATEMENT OF THE APPELLANT THAT HE WAS A SENIORMOST AND EDUCATED MEMBER OF THE FAMILY AND, THE REFORE, ON INSISTENCE FROM HIS FATHER-IN-LAW SHRI BALIRAM MAHAJAN AND HIS BROTHER- IN-LAW SHRI P.B. MAHAJAN AND HIS CO-BROTHER SHRI M.H . ANDURE THAT HE ACCEPTED TO WRITE SUCH DIARIES ON THEIR BEHALF TO REC ORD THEIR FINANCIAL TRANSACTIONS. FURTHER SINCE THE TRANSACTIONS APPEARING IN THE SAID DIARIES WERE OUT OF THE BOOKS OF ACCOUNT, IT WAS FELT SAFE IN THE CUSTODY OF SHRI JALKOTE WHO HAPPENED TO BE A SENIOR GOVT. SERV ANT. 3.93 THE SAID CIRCUMSTANCES IN WHICH THE APPELLANT HAD WRITTEN THE DIARIES ON BEHALF OF HIS RELATIVES AND FRIENDS ALSO STAND S CONFIRMED FROM THE STATEMENT GIVEN BY SHRI M.H. ANDURE (QUE. NO. 47 OF STATEMENT RECORDED U/S. 132(4) DT.23-11-2001) AND HIS SUBSEQUENT STATEMENT U/S. 131 DT. 12-12-2001 (QUE. NO. 43 & 46), STATEMENT OF SHRI B.B. MAHJAN U/S. 131 DT. 7-1-2002 (QUE.6 & 8 ON PAGE NO.2 & 3). THE APPELLANT HAS EXPLAINED THAT THE VARIOUS PERSONS WHOSE NAMES FIGURES IN THESE DIARIES ARE EITHER HIS CLOSE RELATIVES (MR.ANDURE/MAHAJAN) OR CLOSE FRIENDS (MR. M.B.PATIL). IN FACT, THE INVESTIGATION WING HAD CO NDUCTED THE SEARCH AT THE PREMISES OF SHRI M.B.PATIL BEING A CONTRACTOR AND AT THE PREMISES OF THE APPELLANT AND OTHER PERSONS AFTER CONSIDERING THE FACT THAT THEY ARE VERY CLOSELY CONNECTED. FURTHER THE FACT THAT SHRI M .B.PATIL HAS ADMITTED IN HIS STATEMENT RECORDED U/S. 131 ON 07-01-2002 WHIL E ANSWERING TO QN.NO.37 PAGE NO. 12 THAT THE TRANSACTION RECORDED I N THE SEIZED DIARIES ARE BELONGING TO HIM ONLY. ACCORDINGLY, HE HAD ALSO OFFERED UDI ON THE BASIS OF 8% OF THESE RECEIPTS (CONTRACT RECEIPTS) BEFORE THE SETTLEMENT COMMISSION. SHRI M.B.PATIL HAS ALSO FILED AN AFFIDAVIT AFFIRMING THE ABOVE FACTS WHICH IS ON RECORD. THEREFORE, THE APPELLANT AN D HIS RELATIVES WHOSE NAMES APPEAR IN THE SAID DIARIES, HAD OWNED UP TH E TRANSACTIONS APPEARING THE SAID DIARIES WRITTEN BY THE APPELLANT IN THEIR INDEPENDENT STATEMENT RECORDED DURING THE COURSE OF SEARCH OPERATI ONS AT DIFFERENT PLACES. THUS, FROM THE TIME OF COMMENCEMENT OF SEARCH THAT HIS RELATIVES AND FRIEND ALTHOUGH HAVE OWNED UP THE TRAN SACTIONS AND HENCE NOT AN AFTER THOUGHT IN THIS CASE. THE SAID STATEMENT M ENTIONED HAVE NOT BEEN CONTROVERTED BY THE AO IN THE ASSESSMENT ORDER NOR IN HIS REMAND REPORT SUBMITTED BEFORE ME. IN THIS CONNECTION REFERE NCE IS MADE TO THE DECISION OF THE JABALPUR BENCH OF ITAT IN THE CASE OF KARODILAL AGRAWAL [50 TTJ (JAB) 393] WHEREIN THE HON'BLE TRIBUNAL WAS OF THE VIEW THAT THE JOTTINGS IN THE DIARY MADE BY THE ASSESSEE ON BEHALF OF A DEPENDENT PARTNER NEITHER REPRESENTED BOOKS OF ACCOUNT NOR ANY DOCUMENTS AND, THEREFORE, PRESUMPTION U/S.132(4A) WAS NOT AVAILABLE T O TAX THE UDI FOUND IN THE SAID JOTTINGS IN THE DIARY. THE TRIBUNAL , THEREFORE, HAS HELD THAT THE AUTHORISED OFFICER WHILE MAKING ASSESSMENTS IS DU TY BOUND TO CONSIDER ALL RELEVANT MATERIAL THAT IS PLACED ON RECO RD, APART FROM THE JOTTINGS MADE IN THE DIARY. THE PRINCIPLE EMANATING FROM THE SAID DECISION, THEREFORE, FOLLOWS THAT THE STATEMENT GIVEN BY THE APPELLANT AT THE TIME OF SEARCH U/S. 132(4) WITH RESPECT TO THE ENT RIES IN THE STATED DIARIES WHICH REPRESENTED TRANSACTIONS CARRIED OUT ON BEHALF OF HIS RELATIVES ETC., SHOULD HAVE BEEN CAREFULLY EXAMINED A FTER CONSIDERING OTHER MATERIAL PLACED ON RECORD. THE STATEMENTS OF TH E APPELLANT AND HIS RELATIVES HAVE CLEARLY REBUTTED THE PRESUMPTION THAT THE CONTENTS OF THE DIARIES BELONGED TO THE APPELLANT AS IT WAS WRITTEN AN D FOUND IN HIS POSSESSION. 20 3.95 IN ADDITION TO THE STATEMENTS MENTIONED ABOVE, I FIND THAT THE APPELLANT AND ALL THE PARTIES WHOSE NAMES APPEAR IN T HE SAID DIARIES HAVE FILED AFFIDAVITS BEFORE THE DDIT / AO AS PER DET AILS GIVEN BELOW: I) SHRI N.H. JALKOTE - 28-11-2001 II) SHRI M.H. ANDURE - 28-12-2001 III) SHRI P.B. MAHAJAN - 27-12-2001 IV) SHRI M.B. PATIL _ 01-11-2003 IN ALL THESE AFFIDAVITS THE CONCERNED PARTIES HAVE AD MITTED THAT THE TRANSACTIONS APPEARING IN DIARIES NO. A-67, 68 & 71 WRITTEN BY THE APPELLANT BELONG TO THEM. WHILE THE APPELLANT IN HIS AFFIDAVIT HAS DENIED THAT THE ENTRIES APPEARING IN THE DIARIES BELO NG TO HIM. THE AFFIDAVITS BRIEFLY NARRATE THE CIRCUMSTANCES UNDER WHI CH SHRI JALKOTE HAD WRITTEN THE DIARIES ON THEIR BEHALF; ADMITTED T HAT THE TRANSACTIONS WRITTEN IN THE DIARIES BELONG TO THEM AND NOT TO SHR I JALKOTE, AND THE REASON FOR KEEPING THE DIARIES IN THE CUSTODY OF SHRI JALKOTE. THE AO HAS NOT MADE ANY ENQUIRY AT THE TIME OF ASSESSMENT PROCEEDI NGS AS WELL AS AT THE TIME OF REMAND REPORTS FOR REJECTING THE FACT STATED BY ALL THE THREE PERSONS IN THEIR AFFIDAVITS. IN THESE CIRCUMSTANCE S, THERE ARE NO VALID REASONS FOR NOT ACCEPTING THE FACT STATED IN THE AFFIDAVITS AND ENTRIES MADE IN THE DIARIES THAT THESE BELONG TO ALL THE THREE PERSONS AND NOT TO THE APPELLANT. AS STATED BY THE HON'BLE SU PREME COURT IN THE CASE OF MEHTA PARIKH & CO. REPORTED IN 30 ITR 181(SC) THAT WHEN NONE OF THE AUTHORITIES CONSIDERED IT NECESSARY TO CROSS EXAMI NE THE DEPONENT WITH REFERENCE TO THE STATEMENT MADE IN TH E AFFIDAVIT, IT WAS NOT OPEN TO THE REVENUE UNDER THESE TO CHALLENGE THE CORRECTNESS OF THE STATEMENT MADE BY THE DEPONENT IN THE AFFIDAVIT. IN OTHER WORDS, CONSEQUENTLY, THE APPELLANT WAS ENTITLED TO ASSUME THA T THE AUTHORITIES WERE SATISFIED WITH THE AFFIDAVIT AS SUFFICIENT PROOF O N THIS POINT. 3.96 NOW, THE QUESTION ARISES AS TO WHETHER CAN A P ERSON WRITING CERTAIN TRANSACTIONS ON BEHALF OF CLOSE RELATIVES OR FR IENDS AS ACCOUNTANT OR AS A MEDIATOR BE HELD AS THE OWNER OF THE FUNDS INV OLVED IN THESE TRANSACTIONS APPEARING IN THE SAID DIARIES. FURTHERMORE , IN A SITUATION WHERE ALL THESE TRANSACTIONS WERE ACCEPTED BY OTHER PA RTIES AND OFFERED BY THEM FOR TAXATION PURPOSES AS UDI, CAN THESE TRANSAC TIONS BE SLAPPED ON ANOTHER PERSONS JUST BECAUSE HE HAS WRITTEN THE SAME ? THE AO HAS CONSIDERED THE AMOUNTS INVOLVING ON THESE TRANSACTIONS N OTED ON THESE DIARIES AS BELONGING TO THE APPELLANT ON DIE GROUND T HAT THE SAME WERE MAINTAINED IN A VERY SYSTEMATIC MANNER AND IN THE HA NDWRITING OF THE APPELLANT AND ALSO THE SAME WAS FOUND FROM THE POSSESSION OF THE APPELLANT. BUT ONCE THE FACT IS ESTABLISHED AND STANDS E XPLAINED BY THE PARTIES CONCERNED THAT THE TRANSACTIONS RECORDED IN D IARIES ARE RELATED TO THEM, THEN THERE SHOULD NOT BE ANY ROOM FOR DOUBT REGARDING THE OWNERSHIP OF THE TRANSACTIONS UNLESS THE AO HAS GOT ANY S PECIFIC EVIDENCE TO INDICATE THAT THE INVESTMENTS BELONGED T O THE APPELLANT. THE AO HAS JUST RELIED ON THE SYSTEMATIC APPROACH ADOP TED BY THE APPELLANT IN WRITING OF THE TRANSACTIONS AND MAINTAIN ING THE DIARIES METICULOUSLY. BUT THERE IS NO EVIDENCE REGARDING SOURC E OF ANY UNEXPLAINED INVESTMENT OF THE APPELLANT. THEREFORE, ON THESE FACTS AND JUST ON THE BASIS OF PRESUMPTION, IT CANNOT BE HELD THA T THE TRANSACTIONS RECORDED IN THESE DIARIES BELONGS TO THE APPELLANT. 3.97 DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE AO HAD STRONGLY RELIED UPON THE STATEMENT OF SHRI P.B. MAHAJAN U/S. 1 32(4) DT. 21-11- 2001 WHEREIN HE HAD STATED TO HAVE RECEIVED LOAN OF RS.64 LACS FROM THE APPELLANT AND HIS WIFE AS APPEARING IN THE SAID DIAR Y. THIS ISSUE HAS ALSO 21 BEEN REITERATED IN THE ASSESSMENT ORDER AT RELEVANT PAR A AND HAS BEEN MADE A STRONG BASIS FOR HOLDING THAT THE TRANSACTIONS A PPEARING IN THE SAID DIARY BELONG TO THE APPELLANT. THE AUTHORISED R EPRESENTATIVE SHRI ASHOK PATIL HAS STRONGLY ARGUED AGAINST SUCH SELECTIVE RE LIANCE ON THE SAID STATEMENT OF SHRI P.B. MAHAJAN BY THE AO IN THE SAID ASSESSMENT ORDER. THE AR HAD CONTENDED THAT THE REFERRED STATE MENT HAD RECORDED DURING THE COURSE OF SEARCH AND AFTER HAVING UNDERGO NE TREMENDOUS MENTAL PRESSURE OF THE PROCEEDINGS. IT IS WORTH WHILE TO MENTION HERE THAT THE SEARCH HAD COMMENCED AT 7.00 AM ON 21-11-20 01 AND RECORDING OF STATEMENT WAS COMMENCED AT 4.45 PM ON 21 -11-2001. HIS STATEMENT U/S 132(4) CONTINUED ON 22-11-2002 TILL 11. 15 AM. THEN FROM 11.15 TO 12.30 PM I.E WITHIN 1 HOUR AND 15 MIN UTES HE ANSWERED FIVE QUESTION I.E. QN.NO. 15 AND QN.NO.20. BUT ON PE RUSAL OF QN.NO.21 (PAGE NO. 16) OF STATEMENT RECORDED U/S 132(4) ON 22- 11-2001, IT IS REVEALED THAT THERE IS NO TIME MENTIONED WHILE RECOR DING THE ANSWER TO THIS QUESTION. THAT WOULD MEAN THAT WHILE ANSWERING TH ESE TWO QUESTIONS, HE WAS UNDER GREAT FEAR AND MENTAL TENSION. ON PERUSAL OF THE STATEMENT AND TIME SHOWN AT PAGE 18, IT IS SEEN THA T SHRI P.B. MAHAJAN HAS TAKEN MORE THAN 5 HOURS TO ANSWER THESE TWO CRUCIAL QUESTIONS QN.21 AND Q.22 IN WHICH HE HAS STATED THAT HE HAD OBTAINED LOAN OF RS.64 LAKH FROM TIME TO TIME FROM THE APPELL ANT AND HIS WIFE. FROM THE SAID CIRCUMSTANCES, IT CAN BE VISUALIZED THA T WHAT KIND OF AN ATMOSPHERE HAD PREVAILED AT THE TIME OF RECORDING TH E STATEMENT OF SHRI P.B. MAHAJAN. HOWEVER, AGAIN IN THE SAME CONTINUED ST ATEMENT ON 23- 11-2001, MR. P.B. MAHAJAN HAS IN REPLY TO QUESTION NO .41 AND 42 HAS EXPLAINED THAT THE WHATEVER HE HAS STATED IN ANSWER T O QN.NO.21 AND 22 WAS NOT TRUE. HE FURTHER EXPLAINED THAT WHATEVER REC ORDED IN THE SAID DIARIES ARE NOTHING BUT HIS UDI EARNED FROM VARIOUS SO URCES. SO, THE REPLY GIVEN BY SHRI MAHAJAN HAS BEEN CORRECTED BY HI M IN THE SAME STATEMENT RECORDED U/S 132(4) OF THE IT ACT IN WHICH HE HAS STATED THAT THESE TRANSACTIONS ARE RELATED TO HIM ONLY AND THE SAME HAS OFFERED AS HIS UDI IN HIS BLOCK RETURN. IT HAS ALSO BEEN EXPLAINED THAT THE STATEMENT GIVEN IS NOT CORRECT AND HE HAS NOT TAKEN ANY LOAN FR OM THE APPELLANT OR HIS WIFE AS STATED IN REPLY TO QUESTION NO.21 TO 25 TH IS FACT HAS ALSO BEEN CONFIRMED BY SHRI P.B.MAHAJAN IN HIS AFFIDAVIT DT.27-12-2001 WHICH IS PLACED ON RECORD. THE SELECTIVE RELIANCE ON QUESTION NOS. 21 & 22 OF SHRI P.B. MAHAJAN BY THE AO, THEREFORE, HAS NO EVIDENTIAL VALUE, AFTER CONSIDERING THE FULL STATEMENT U/S. 132(4) AND A FFIDAVITS FILED BY SHRI P.B. MAHAJAN. 3.98 IN THE INSTANT CASE ALSO, THE FACTS WERE STATED BY THE PERSONS CONCERNED IN THE STATEMENTS U/S 132(4) AND U/S 131 OF T HE INCOME TAX ACT AND IN AFFIDAVITS BEFORE THE DDIT (INV), AURANGA BAD AND THE SAME WERE NOT CHALLENGED BY THE AO AND NO FURTHER ENQUIR Y HAS BEEN MADE BY HIM. HERE IT IS WORTHWHILE TO NOTE THAT THE HON'B LE PUNE TRIBUNAL IN THE CASE OF CHANDRMOHAN MEHTA VS ACIT 71 ITD 245 (PUN E) HAS HELD THAT IT IS NOT OPEN TO THE REVENUE TO CONSIDER ONLY T HAT PART OF THE STATEMENT WHICH IS BENEFICIAL TO IT AND REJECT THE OT HER PART OF THE STATEMENT WHICH IS DETRIMENTAL TO IT. THIS VIEW IS ALSO SUPPORTED BY AHMEDABAD TRIBUNAL IN THE CASE OF GHANSHYAMBHAI R.THA KKAR (56 TTJ 460 (AHD). THE AO HAS TO CONSIDER THE WHOLE STATEMENT BEFORE GIVING ANY FINDING. THE FACT THAT SHRI MAHAJAN HAS CORRECTE D HIS EARLIER REPLY GIVEN TO QN. 21 TO 25 OF STATEMENT U/S 132(4) DATED 2 2-11-2001 IN THE SAME STATEMENT IN REPLY TO QUESTION NO.41 AND FURTHER HE HAD OFFERED UDI RELATING TO THE ENTRIES IN THE SEIZED DIARIES IN H IS HANDS AND PAID THE TAXES, THERE SHOULD NOT, THEREFORE, BE ANY GROUND FOR PRESUMPTION. THE AO HAS REPEATED ALMOST THE SAME FACTS IN HIS REMAND RE PORTS AND OTHER SUBMISSIONS AS MENTIONED IN THE ASSESSMENT ORDER. ALL THESE R EASONS GIVEN BY THE AO ARE JUST ON PRESUMPTION THAT THE TRAN SACTIONS RECORDED IN THE DIARIES RELATE TO THE APPELLANT AS THE SAME HAS BEEN WRITTEN IN HIS 22 HAND WRITING AND HENCE THESE ARE UNEXPLAINED INVESTME NT OF THE APPELLANT. THESE PRESUMPTIONS HAVE BEEN STRONGLY REBUTT ED IN THE FORM OF STATEMENTS U/S. 132(4) AND 131 AND AFFIDAVITS BY THE CONCERNED PERSONS. 3.99 HERE IT IS WORTHWHILE TO MENTION THAT THE APPEL LANT BEING A SENIOR GOVERNMENT SERVANT WAS SUBJECTED TO AN INDEPENDE NT ENQUIRY BY THE ANTI CORRUPTION BUREAU POST INCOME-TAX SEARCH OP ERATIONS. THE ACB HAD MADE DISCRETE ENQUIRIES AT THEIR LEVEL AFTER COLL ECTING XEROX COPIES OF THE SEIZED DIARIES AND STATEMENT OF THE PERSONS; THE APPRAISAL REPORT AND AFTER IN DEPTH INVESTIGATION, THE BUREAU HAS GIV EN A CLEAN CHIT TO THE APPELLANT IN HOLDING THAT THERE WAS NO CASE OF AMASSI NG OF DISPROPORTIONATE WEALTH AGAINST THE APPELLANT. THE CO PY OF LETTER FROM THE SUPERINTENDENT OF POLICE, ANTI CORRUPTION BUREA U DT. 18-11-2003 GIVING THESE FINDING WAS MADE AVAILABLE TO THE AO BEF ORE PASSING THE ASSESSMENT ORDER ON 27-11-2003. FURTHER DURING THE COUR SE OF APPELLATE PROCEEDINGS VIDE MY LETTER DT.13-2-2004 IN QUIRY WAS MADE FROM THE SUPERINTENDENT OF POLICE CALLING FOR COPY OF INQUIRY REPORT AND THE FINDINGS OF THE INQUIRY CONDUCTED BY THE ACB ON THE BASIS OF THE DIARIES SEIZED FROM THE APPELLANT DURING THE COURSE OF SEARCH OPERATIONS. THE S.P., ACB, AURANGABAD VIDE HIS LETTE R DT. 31-3-2004 HAS STATED THAT AN INDEPENDENT INQUIRY WAS CONDUCTED AFTE R THE SEARCH AND SEIZURE OPERATIONS BY INCOME TAX AUTHORITIES ON THE BA SIS OF INFORMATION GATHERED AND VARIOUS DOCUMENTS AND DIARIE S ETC. COLLECTED FROM THE I.T. OFFICE, PWD AND STATEMENT OF SHRI N.H. JALKOTE. FURTHER THE SAID LETTER ALSO STATE THAT THE INQUIRY HAS BEEN CLOSED, AS NO SUBSTANTIAL PRIMA FACIE EVIDENCE OF ACCUMULATION OF DISPROPORTI ONATE ASSETS HAS BEEN FOUND AND HENCE NO CHARGE SHEET HAS BEEN FILED AGAINST SHRI N.H. JALKOTE AND LASTLY THE LETTER STATES THAT THERE IS NO E NQUIRY PENDING AGAINST THE SAID OFFICIAL. ONCE THESE FACTS ARE ESTAB LISHED BY AN INDEPENDENT GOVERNMENT AGENCY AFTER CONDUCTING DISCR ETE ENQUIRIES AT THEIR LEVEL, THERE IS NO REASON FOR THE AO TO STILL CO NSIDER THE TRANSACTIONS NOTED IN THE SEIZED DIARIES BELONGING TO T HE APPELLANT AS HIS UDI. IT IS A STRONG EVIDENCE IN FAVOUR OF THE APPELL ANT WHICH ESTABLISHES THAT THE TRANSACTIONS APPEARING IN THE SAID DIARIES DID NOT BELONG TO THE APPELLANT. THE FINDING GIVEN BY THE GOVT. AGENCY ON THE BASIS OF INDEPENDENT INQUIRY AFTER COLLECTING DOCUMENTS FROM THE INCOME TAX DEPARTMENT HAVE TO BE TAKEN COGNIZANCE BY THE AO IN DECIDING THE OWNERSHIP OF THE ENTRIES IN THE SAID DIARIES. I DO NOT FIND ANY COGENT REASON AS TO WHY SUCH REPORT OF THE ACB WAS REJECTED BY THE AO WHICH CONSTITUTED AN IMPORTANT EVIDENCE IN FAVOUR OF THE A PPELLANT. 3.100 THE JT. DIRECTOR OF INCOME-TAX (INV.), NASIK W HO HAD CARRIED OUT THE SEARCH AND SEIZURE OPERATIONS AT THE PREMISES OF THE APPELLANT, SHRI M.B. PATIL, SHRI M.H.ANDURE AND SHRI P.B. MAHAJAN, HAS PREPARED A DETAILED APPRAISAL REPORT DT. 11-2-2002. THE SAID RE PORT WAS OBTAINED FROM THE AO AND PLACED ON RECORD. READING OF THE SA ID APPRAISAL REPORT SHOWS THAT THE INVESTIGATION WING AFTER RECORDING THE STATEMENTS OF THE APPELLANT AND OTHERS AS ALSO EXAMINATION OF THE SEIZED DOCUMENTS, AFFIDAVITS OF THE PARTIES AND OTHER RELEVANT INFORMAT ION; HAVE GIVEN A FINDING AT RELEVANT PARAS THAT THE TRANSACTIONS APPEAR ING IN DIARY NO. A67, 68 & 71 WRITTEN BY SHRI N.H. JALKOTE BE CONSIDE RED AS BELONGING TO SHRI M.B. PATIL AND HIS ASSOCIATES, SHRI M.H. ANDURE AN D SHRI P.B. MAHAJAN FOR THE PURPOSE OF DETERMINING UDI IN THEIR RESPECTIVE HANDS. THE SAID APPRAISAL REPORT MENTIONS THAT THE NET BALANC E APPEARING IN THE RUNNING ACCOUNT AT RS.7.26 .CRORES FROM 1-7-2001 TO 14-11-2001 ALONG WITH THE OPENING FIGURE OF RS.2.47 CRORES TOTAL ING TO RS.9.73 CRORES AS APPEARING IN THE SEIZED DIARIES SHOULD BE CONSIDERED AS UDI IN THE HANDS OF SHRI M.B. PATIL. LASTLY, IN THE CASE OF SHRI M.H. ANDURE THE PROVISIONAL UDI SUGGESTED BY THE INVESTIGATION WING IS A T RS.1.70 CRORES 23 ON THE BASIS OF THE ENTRIES APPEARING IN THE SAID DIAR IES. WHILE IN THE CASE OF SHRI PRASHANT MAHAJAN, THE PROVISIONAL UDI HAS BEEN STATED TO BE AT RS.1.40 CRORES BASED ON THE ENTRIES APPEARING IN THE SAID DIARIES AND OTHER DOCUMENTS FOUND DURING THE SEARCH OPERATIONS. IT MAY, THEREFORE, BE BORNE IN MIND THAT THE INVESTIGATION WING OF THE DEPARTMENT AFTER IN DEPTH ANALYSIS AND POST SEARCH INVESTIGATION HAD REACHED TO A CONCLUSION THAT THE ENTRIES APPEARING IN THE SAID DIA RIES A-67, 68 & 71 WRITTEN BY THE APPELLANT ACTUALLY BELONGED TO THE P ARTIES NAMED IN THE SAID DIARY AND, THEREFORE, THE UDI WAS TO BE ASSESSED IN THE HANDS OF THE RESPECTIVE PARTIES MENTIONED ABOVE. THE FINDINGS OF TH E INVESTIGATION WING, THEREFORE, CANNOT BE SIDELINED BY THE AO FOR D ETERMINING OWNERSHIP OF THE TRANSACTIONS APPEARING IN THE SAID DI ARIES AND ITS CORRESPONDING UDI. ON PERUSAL OF THE SAID APPRAISAL REP ORT COUPLED WITH THE REPORT OF ACB, STATEMENTS OF THE APPELLANT AND OT HER PARTIES, AFFIDAVITS AND OTHER CIRCUMSTANTIAL EVIDENCES, I AM OF THE VIEW THAT THE TRANSACTIONS APPEARING IN THE SAID DIARIES CANNOT BE TA KEN THAT OF THE APPELLANT. 3.101 IT IS PERTINENT TO MENTION HERE THAT SHRI M.B. PATIL AND HIS ASSOCIATES HAVE MOVED A PETITION BEFORE THE SETTLEMENT COMMISSION U/S. 245C DT. 21-08-2002 WHEREIN THE TRANSACTIONS APPE ARING IN DIARIES A-67, 68 & 71 WRITTEN BY THE APPELLANT HAVE BEEN AD MITTED AS THEIR CONTRACT RECEIPTS. SHRI PATIL HAD OFFERED THE ADDIT IONAL INCOME OF RS.50.79 LACS OVER AND ABOVE DECLARED IN THE BLOCK RE TURN AND HAS PAID THE ADDITIONAL TAX OF RS.31.08 LACS IN HIS PETITION U /S. 245C. COPY OF THE PAYMENT CHALLAN WAS PRODUCED BEFORE ME. THE SAID PETI TION WAS ADMITTED BY THE HON'BLE SETTLEMENT COMMISSION, MUMBAI VIDE ITS ORDER U/S. 245D(1) DT. 12-08-2003 AFTER CONSIDERING THE OBJ ECTIONS RAISED BY THE DEPARTMENT AND THEREBY AFFIRMING THE CONTENTION OF THE APPELLANT, THAT THE ENTRIES IN THE SAID DIARIES BELONGED TO SHRI M.B. PATIL AND ASSOCIATES AND, THEREFORE, THE CORRESPONDING UDI NEEDED TO BE TAXED IN HIS HANDS. IT IS RELEVANT TO MENTION HERE THAT THE OR DER OF THE SETTLEMENT COMMISSION U/S. 245D DT. 12-8-2003 WAS AVAILABLE WITH T HE AO BEFORE PASSING OF THE BLOCK ASSESSMENT ORDER DT. 27-11-2003. THE AO, THEREFORE, SHOULD HAVE TAKEN COGNIZANCE OF SUCH ORDER OF THE SETTLEMENT COMMISSION IN ARRIVING AT A CORRECT CONCLUSION IN HOLD ING THAT ENTRY IN THE NAME OF SHRI M.B. PATIL IN THE SAID DIARY ACTUAL LY BELONGED TO HIM AS ADMITTED BEFORE THE SETTLEMENT COMMISSION. I AM, THER EFORE, OF THE CONSIDERED VIEW THAT THE RUNNING ACCOUNT OF SHRI M.B . PATIL AND ASSOCIATES AS APPEARING IN THE DIARY, WHICH HAVE BEEN A DMITTED AS HIS UNDISCLOSED TRANSACTION BY THE SETTLEMENT COMMISSION, CA NNOT BE SUBJECT MATTER OF ASSESSMENT IN THE HANDS OF THE APPELLA NT. THEREFORE, IT FOLLOWS THAT THE TRANSACTIONS APPEARING IN THE SAID DI ARIES PERTAINING TO SHRI M.B. PATIL AND HIS ASSOCIATES WHICH IS SUB JUDICE B EFORE THE SETTLEMENT MISSION COULD NOT HAVE BEEN CONSIDERED AS U DI IN THE HANDS OF THE APPELLANT U/S.158BC. 3.102 ANOTHER IMPORTANT ASPECT OF THIS CASE FOR CONSIDE RATION IS THE FACT THAT SHRI M.H. ANDURE, SHRI B.B. MAHAJAN AND S HRI P.B. MAHAJAN HAVE NOT ONLY ADMITTED THE TRANSACTIONS APPEARING IN THE SA ID DIARIES AS THEIR OWN BUT HAVE ALSO OFFERED TO TAX THE UNDISCLOSED INCOM E APPEARING IN THE SAID DIARIES. THE DETAILS OF SUCH DECLARATION OF UD I BY THESE PARTIES IS GIVEN AS UNDER : SR. NO. NAME OF THE PARTY DATE OF BLOCK RETURN UDI DECLARED (RS.) UDI ASSESSED (RS.) TAX PAID (RS.) 1 SHRI M.H. ANDURE 18 - 3 - 2002 9863500 18653630 6036462 2 SHRI P.B. MAHAJAN 15 - 3 - 2002 6807140 8515943 4165969 24 3 SHRI B.B. MAHAJAN 15 - 3 - 2002 161306 467791 98718 I MAY MENTION HERE THAT THE AO HAS ASSESSED PART OF THE UDI DECLARED BY THESE PARTIES ON PROTECTIVE BASIS, SINCE CORRESPONDI NG UDI PERTAINED TO THESE PARTIES HAVE BEEN ASSESSED ON SUBSTANTIVE BASIS IN T HE HANDS OF THE APPELLANT. THE UDI OFFERED ON SUCH ENTRY IN DI ARIES BE REJECTED, SINCE A SUBSTANTIAL AMOUNT HAS BEEN ADMITTED BY THESE P ARTIES AND TAXES HAVE BEEN PAID THEREON. IT IS AN ADMITTED FACT THAT THE AFORESAID PARTIES WERE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCT ION AND SEEDS AND HAD EARNED UNDISCLOSED INCOME AS EVIDENT FROM DOCU MENT MARKED ANNEXURE-4, SEIZED FROM THE POSSESSION OF SHRI M.H. ANDU RE. THE COPY OF THE SAID SEIZED DOCUMENT SHOWS THAT SHRI ANDURE HAD EARNED UNACCOUNTED INCOME FROM CONTRACTORSHIP BUSINESS AND, TH EREFORE, THIS HAS TO BE READ WITH ENTRIES APPEARING IN THE SAID DIA RIES IN THE NAME OF SHRI ANDURE. THE RELEVANT POINT HERE IS THAT SHRI AN DURE AND OTHERS HAD EARNED UNACCOUNTED INCOME FROM ITS BUSINESS WHICH HAS MA NIFESTED IN THE FORM OF ENTRIES APPEARING IN THE SAID DIARIES AND, THEREFORE, THE ADMISSION OF SUCH ENTRIES BY THESE PERSONS AND UDI OFFERED IN THEIR BLOCK RETURN HAVE TO BE CONSIDERED IN DECIDING THE O WNERSHIP OF THE TRANSACTION IN THE SEIZED DIARY. 3.103 DURING THE COURSE OF APPELLATE PROCEEDINGS AS AL SO IN THE REMAND REPORT, THE AO HAS STRONGLY ARGUED ON THE ENTR IES APPEARING IN THE DIARIES A-67, 68 & 71 THAT SHOWED UNDERTAKINGS AND ASSURANCES FOR REPAYMENT OF THE LOANS ADVANCED BY THE APPELLANT. T HE POINT MADE BY THE AO IS THAT THE SAID UNDERTAKINGS AND ASSURANCES WHICH HAVE BEEN SIGNED BY THESE PARTIES ON THE RESPECTIVE DATES ESSENTIAL LY DENOTES AN ASSURANCE OF HAVING BORROWED THE MONEY FROM THE APPEL LANT. THE INSTANCES OF SUCH ASSURANCES AND UNDERTAKING HAVE BEEN M ENTIONED IN HIS REMAND REPORT WHICH HAVE BEEN DULY CONSIDERED BY ME. ON EXAMINATION OF SUCH SPECIFIC ENTRIES APPEARING IN THE SAID DIARIES AS REFERRED BY THE AO I FIND THAT SUCH ENTRIES ARE NOT P ART OF THE RUNNING ACCOUNT IN THE NAME OF VARIOUS PERSONS MENTIONED IN TH E SAID DIARIES. THIS IS BECAUSE THERE ARE NO ENTRIES ON THE CORRESPONDIN G DATES OR PERIOD WHICH INDICATE ANY REPAYMENT OR CORRELATION BETWEEN THE TWO ACCOUNTS. THIS MAKES THE VERY ASSUMPTION OF THE ASSESSING OFFICER SHAKY. THE ASSESSING OFFICER, THROUGH OUT THE ASSESSMENT PRO CEEDINGS; MAINTAINED THAT THIS IS A LOAN ACCOUNT OF THE APPELL ANT ADVANCED TO THESE PARTIES. THE ASSESSING OFFICER HAS ALSO NOTED INSTANC ES OF SOME COMMITMENTS & UNDERTAKINGS BY THE SAID MR. ANDURE BUT HAS NEVER MADE ANY ENQUIRY WHETHER IN FACT THE SAID COMMITMENT S & THE SAID RUNNING ACCOUNTS ARE RELATED WITH EACH OTHER. IF SO, WHETHER THE ENTRIES IN THE SO CALLED UNDERTAKINGS ARE REFLECTED AS REPAYME NTS IN THE RUNNING ACCOUNTS. IT IS IRONY THAT NO SUCH ENTRIES COR RELATING THE SO CALLED UNDERTAKINGS & THE RUNNING ACCOUNTS WITH EACH OTHER ARE FOUND THROUGHOUT THE RUNNING ACCOUNTS OF MR. M. H. ANDURE, MAKING THE ASSESSING OFFICER'S ASSUMPTION DOUBTFUL. THERE ARE NO ENTR IES REFLECTING ANY ADDITION ON ACCOUNT OF 'INTEREST' TH ROUGH OUT THE SAID RUNNING ACCOUNT. THE ASSESSING OFFICER ON ONE HAND IS OF THE OPINION THAT THE SAID RUNNING ACCOUNT IS THE LOAN ACCOUNT ADV ANCED BY THE APPELLANT & ON THE OTHER HAND HE IS NAIVE ENOUGH TO BELIEVE THAT ONE COULD ADVANCE SUCH A HUGE AMOUNT WITHOUT CHARGING AN Y INTEREST & ANY SECURITY IN ANY FORM. 3.104 THE ASSESSING OFFICER HAS REFERRED INSTANCES OF ASSURANCES IN TWO ACCOUNTS OF MR. GANGADHAR MAHAJAN FOR CERTAIN TR ANSACTIONS ON 02.11.1997 IN RESPECT OF HIS OUTSTANDING BALANCE OF RS. 23.02 LACS. THE SAME ACCOUNT OF MR. MAHAJAN IS ALSO APPEARING ON PAGE 12 OF DIARY A-71. THE ASSESSING OFFICER HAS OBSERVED THAT MR.GANGADHAR MAHA JAN HAS 25 GIVEN SOME UNDERTAKING EVEN A CURSORY GLANCE ON THE A BOVE TRANSACTION WILL REVEAL THAT THIS IS AN AGREEMENT BETWEEN THE SIGN ATORIES ON THE SAME DOCUMENT. AS EVIDENT & VISIBLE THE SAID AGREEME NT IS SIGNED BY MR. GANGADHAR MAHAJAN & MR. M. H. ANDURE. THERE IS NO ME NTION OF APPELLANT'S NAME IN THESE TWO ACCOUNTS. FURTHER SHRI M . H. ANDURE HAS DULY OFFERED THE LOAN ADVANCED TO MR. GANGADHAR MAH AJAN DURING THE BLOCK PERIOD AS HIS UNDISCLOSED INVESTMENT IN HIS B LOCK RETURN. THE ASSESSING OFFICER HAS EVENTUALLY IGNORED THIS FACT AND AL SO IGNORED THE FACT THAT THIS AGREEMENT BETWEEN MR. M. H. ANDURE & MR. GANGADHAR MAHAJAN WAS SIGNED WAY BACK ON 24.10.1998, MUCH BEF ORE THE DATE OF SEARCH. THE AO HAS, THEREFORE, REACHED TO AN INCORREC T CONCLUSION IN HOLDING THAT THESE LOANS WERE ADVANCED BY THE APPEL LANT. 3.105 THE AO IN HIS REMAND REPORT HAS ALSO REFERRED TO THE ISSUE OF DOUBLING OF LOAN AMOUNT (DAM DUPPAT) WHICH APPEARS A T SOME PAGES OF THE DIARIES. THE AO WAS OF THE VIEW THAT SUCH DOUBL ING OF THE AMOUNT PERTAINS TO THE LOAN WHICH TENDS TO DOUBLE AFTER A FIXED PERIOD OF TIME. THE INSTANCES OF SUCH DOUBLING OF LOAN HAVE BEEN MENTI ONED IN THE REMAND REPORT SUBMITTED BEFORE ME. THE SPECIFIC ENTRY OF SUCH DOUBLING OF THE AMOUNT WAS EXAMINED AND IT IS SEEN THAT THESE AR E NOT PART OF THE RUNNING ACCOUNT APPEARING IN THE NAME OF VARIOUS PAR TIES AND, THEREFORE, THE SAID ENTRIES REFLECTED SEPARATELY DULY OUTLINE D IN BOXES HAVE NO CORRELATION WITH THE RUNNING ACCOUNTS. FURTHER I F IND THAT THE AO HAS NOT CONSIDERED SUCH ENTRY OF DOUBLING WHILE DETERMINING THE UDI IN THE HANDS OF THE APPELLANT. THE INSTANCES OF SUCH 'DAM DUPPAT' DOES NOT CLARIFY AS TO WHO HAS ADVANCED THE LOAN AND WHO IS TH E RECIPIENT AND, THEREFORE, THESE ARE HYPOTHETICAL FIGURES WHICH DOES NOT EMANATE FROM THE RUNNING ACCOUNT OF THE RESPECTIVE PERSONS MENTI ONED IN THE SAID DIARIES. I MAY ALSO POINT OUT HERE THAT THE ENTRY OF 'DAM DUPPAT' WAS DULY INQUIRED DURING THE COURSE OF POST SEARCH STATEMEN TS OF SHRI ANDURE AND SHRI PRASHANT MAHAJAN WHO HAVE STATED TH ESE ENTRIES AS HYPOTHETICAL SINCE IT DOES NOT EMANATE FROM THEIR R UNNING ACCOUNT ADMITTED AS UNDISCLOSED INCOME IN THEIR HANDS (REFE R TO QUE. NO. 40 OF STATEMENT U/S. 131 IN RESPECT OF SHRI M.H. ANDURE & QU E. NO.35 OF STATEMENT U/S. 131 IN RESPECT OF SHRI PRASHANT MAHA JAN). 3.106 FURTHER I AM OF THE VIEW THAT THE AO HAS NOT C ONSIDERED FOLLOWING FACTS WHILE REFERRING TO 'DAM DUPPAT' INFE RRED AS LOANS ADVANCED BY THE APPELLANT.), I) IN MONEY LENDING BU SINESS, SECURITY IN THE FORM OF PROMISSORY NOTES, BLANK CHEQUES, MORTGAGE DEEDS, PROPERTY DOCUMENTS IS TAKEN BUT NO SUCH SECURITY IS FOUND IN THIS CASE, II) IN MONEY LENDING BUSINESS, MONEY IS LENDED AT CERTAIN RATE OF INTEREST. IN THIS CASE NO SUCH INTEREST IS CHARGED ANYWHERE, III) MON EY LENDER KEEPS THE RECORD FROM WHERE THE FUNDS ARE COMING & WHERE THEY ARE GOING. IN THIS CASE NOWHERE IT IS FOUND FROM WHERE THE FUNDS ARE C OMING, IV) MR. M.H. ANDURE, MR.M.B. PATIL, MR. MAHAJAN HAVE SIGNED THE D IARIES AS ACKNOWLEDGEMENT OF TRANSACTIONS AMONGST THEMSELVES AND N OT WITH THE APPELLANT. THUS, INFERENCE DRAWN BY THE ASSESSING OFFIC ER ABOUT THE MONEY LENDING TRANSACTION OF THE APPELLANT IS NOT BASE D ON CORRECT APPRECIATION OF FACTS AND EVIDENCES ON RECORD. 3.109 PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HA S REFERRED TO ENTRIES OF PERSONAL EXPENSES IN THE RUNNING ACCOUNT IN THE SAID DIARIES TO SUBSTANTIATE THAT THE ENTRIES APPEARING IN T HE SAID DIARIES PERTAINED WAS APPELLANT AND, THEREFORE, THE CORRESPON DING UNDISCLOSED INCOME WAS TO BE TAXED IN THE HANDS OF THE APPELLANT. THE ASSESSING OFFICER HAS GIVEN SOME INSTANCES RECORDED IN THE SEIZED DIARIES A-67,A- 68 AND A-71 AND HAS CONCLUDED THAT THESE ARE THE PERSO NAL EXPENSES OF 26 THE APPELLANT. EXAMINATION OF SUCH ENTRIES SHOWS THAT M OST OF THE EXPENSES ARE OF REVENUE NATURE & PERTAIN TO THE BUSINE SS OF MR. M. H. ANDURE. IT IS NOT CLEAR WHY THE ASSESSING OFFICER IS ASSUMI NG THAT THESE EXPENSES WERE INCURRED BY THE APPELLANT & NOT BY MR. ANDURE. THESE EXPENSES, PERHAPS, ARE AT THE MOST UNDISCLOSED EXPENSES O F MR. ANDURE. THIS BECOMES EVIDENT WHEN ONE SEES THE TRANSACTION IN D ETAIL. IN THE ITEM WISE LIST WRITTEN ON RIGHT HAND SIDE CORNER 'PAGE 5, DIARY A-67' THE FIRST FOUR TRANSACTIONS DO NOT PUT ANY LIGHT ON THE NA TURE OF THE SAID TRANSACTIONS. BUT THE REMAINING TRANSACTIONS LIKE 0.06 DASHMESH NAGAR, JE CORPORATION, 0.06 CORPORATION-SHOPS, 0.03 M OBILE, 0.03 STD, 0.03 MOBILE [phone] FEBRUARY & 0.05 OSMANPURA C ORPORATION TAX DEFINITELY PUT SOME LIGHT ON THE NATURE OF THE TRANSA CTIONS IN QUESTION. IT IS PERTINENT TO NOTE HERE THAT MR. M. H. ANDURE IS A CONTRACTOR AND THE AFORESAID EXPENSES PERTAINED TO HIM SUCH AS THE CORPORAT ION TAX, STD EXPENSES AND MOBILE EXPENSES IN THE NAME OF MR. SHANKAR RAO ANDURE, WHO IS THE BROTHER OF SHRI M.H. ANDURE. 3.110 SIMILARLY INSTANCES OF PERSONAL EXPENSES APPEARING IN THE RUNNING ACCOUNT OF M.B. PATIL IN THE SAID DIARIES HAV E NOT BEEN ESTABLISHED BY THE AO TO HAVE BEEN ACTUALLY INCURRED BY THE APPELLANT AND, THEREFORE, THE ARGUMENT OF PERSONAL EXPENSES IN H OLDING THE TRANSACTIONS APPEARING IN THE SAID DIARIES TO HAVE BELO NGED TO THE APPELLANT DOES NOT HOLD GOOD. FURTHER, SHRI M.H. AND URE IN HIS STATEMENT U/S. 131 HAS ADMITTED THAT PERSONAL EXPENSES A PPEARING IN HIS RUNNING ACCOUNT BELONG TO HIM WHICH STANDS REDUCED FROM THE BALANCE OF THESE RUNNING ACCOUNTS (REFER TO QUE. NO. 41 OF STATEMENT U/S. 131 IN RESPECT OF SHRI M.H. ANDURE). THIS IS ALSO BEEN AFFIRMED BY THE APPELLANT IN HIS STATEMENT RECORDED U/S. 132(4) [Q UE. NO. 36] AND AT QUE. NO. 29, 66 & 72 OF STATEMENT RECORDED U/S. 131 D T. 13-12-2001. THE STATEMENT OF THE APPELLANT AND THE PARTY CONCERN ED ON THIS ISSUE, THEREFORE, CANNOT BE IGNORED, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE TO PROVE OTHERWISE. THEREFORE, IN THE LIGH T OF ABOVE OBSERVATIONS, I AM OF THE VIEW THAT THE PERSONAL EXPEN SES AS REFERRED BY THE AO IN THE ASSESSMENT ORDER DO NOT PERTAIN TO THE A PPELLANT AND, THEREFORE, IT NEGATES THE FINDING THAT THE RUNNING A CCOUNT AS APPEARING IN THE ENTRIES TO THE SAID DIARIES BELONG TO THE APPEL LANT. THERE ARE NO EVIDENCES OF PERSONAL EXPENSES HAVING BEEN ACTUALLY IN CURRED BY THE APPELLANT EXCEPT FOR PAYMENT MADE TO KESARI TOURS WHI CH IS PROVED TO HAVE BEEN INCURRED BY THE APPELLANT. THIS EXPENDITU RE ON ACCOUNT OF KESARI TOURS IS DEALT SEPARATELY AT IN GR.NO.8 OF THIS A PPELLATE ORDER. 3.111 LASTLY, THE AO IN HIS REMAND REPORT HAS STRON GLY RELIED UPON THE FACT THAT THE SAID RUNNING ACCOUNTS IN THE NAME OF SHRI M.H. ANDURE, SHRI B.B. MAHAJAN, SHRI P.B. MAHAJAN AND SHRI M.B. PATIL HAVE BEEN SIGNED BY THEM ON DIFFERENT DATES AND, THEREFORE, IT WAS INFERR ED BY HIM THAT THESE ACCOUNTS APPEARING IN THE SAID DIARIES REPRESENTED LOANS ADVANCED BY THE APPELLANT TO THESE PARTIES AND HENCE CONSTITUTED UD I IN THE HANDS OF THE APPELLANT. PERUSAL OF THE RECORDS SHOWS THAT THE APPEL LANT AND THE AFORESAID PARTIES IN THEIR STATEMENTS RECORDED HAVE EXP LAINED THE REASONS ON WHICH SUCH ACCOUNTS WERE WRITTEN BY THE APP ELLANT ON THEIR BEHALF AND THEIR SIGNATURES WAS TESTIMONY TO OWN UP SUCH TRANSACTIONS. IT IS ALSO OBSERVED THAT THE SAID SIGNATURES ARE IDENTIFI ED BY THE RESPECTIVE PERSONS AND HAVE STATED TO HAVE SIGNED THE D IARY FOR AUTHENTICATING THE TRANSACTIONS AND THE BALANCES DRAW N IN THE DIARY. REFERENCE IS MADE TO STATEMENT OF THE APPELLANT REC ORDED U/S. 132(4) DT. 22-11-2001 AT PAGE 20 AND QUE. NO. 7 & 32 OF STATEM ENT U/S. 131. THE SAID STATEMENT OF THE APPELLANT HAS BEEN CONFIRMED BY SHRI M.B. PATIL IN HIS STATEMENT U/S. 131 DT.7-12-2001 AT QUE. NO. 23. SHRI M.H. ANDURE IN HIS STATEMENT U/S. 132(4) DT. 22-11-2001 AT QUE. NO. 4 7 HAS ONCE AGAIN 27 OWNED UP THE SIGNATURES APPEARING AT VARIOUS PLACES OF THE RUNNING ACCOUNT SO AS TO AUTHENTICATE THE TRANSACTIONS BELONGIN G TO HIM WHICH HAS BEEN SUBSEQUENTLY OFFERED TO TAX IN HIS BLOCK RETUR N. IN THESE FACTS AND CIRCUMSTANCES, IT CAN BE INFERRED THAT THE APPE LLANT WAS WRITING THE DIARIES AS AN ACCOUNTANT ON BEHALF OF THE RELATIVES AN D FRIENDS, ENJOYING TRUSTWORTHINESS AND FAITH REQUIRED ON SUCH LARGE TRA NSACTIONS. THUS, IF AN ACCOUNTANT IS MAINTAINING A DIARY IN A PARTICULAR M ANNER BEING AN EMPLOYEE OF THE OWNER, IN ANY CIRCUMSTANCES, IT CAN NOT BE HELD THAT THE FUNDS INVOLVING IN THE RECORDED TRANSACTIONS BY HIM SHOULD BE TAXED IN THE HANDS OF THE ACCOUNTANT OF THE TRANSACTIONS. IN TH IS CASE, THE APPELLANT HAS ALSO ACTED IN A SIMILAR FASHION IN WRITING THE DIAR IES WHICH WAS THRUST UPON HIM BY HIS RELATIVES AS EVIDENT FROM THE STATEMENT OF THE APPELLANT AND THE CONCERNED PARTIES. THEREFORE, THERE IS NO RE ASON FOR CONSIDERING THE UDI IN THE HANDS OF THE APPELLANT FOR THE TRANSACTIONS RECORDED BY HIM ON BEHALF OF HIS RELATIVES AND FRIEND . IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT THE TRANSACTIONS RE CORDED IN SEIZED DIARIES ARE RELATED TO SHRI M.B.PATIL, SHRI M.H.ANDURE AND SHRI P.B. MAHAJAN AND THERE IS NO REASON FOR CONSIDERING SAME AS UDI IN TH E HANDS OF THE APPELLANT. 3.112 MY FINDING MENTIONED ABOVE ALSO FINDS SUPPORT FROM THE FOLLOWING FACTS: (A) SHRI M.B.PATIL HAS ADMITTED THAT TRANSACTION S RECORDED IN DIARIES IN HIS NAME BELONG TO HIM AND OFFERED UDI ON THESE TRANS ACTIONS CONSIDERING THE SAME AS THE TRANSACTIONS ARE CONCERNED, THE SAME HAVE BEEN ADMITTED BY SHRI M.B. PATIL AS IT BELONGS TO HIM . THE QUESTION OF ACCEPTING THE QUANTUM OFFERED BEFORE THE SETTLEMENT COMMISSION IS A DIFFERENT ISSUE, WHICH HAS NO BEARING ON THE TAXABILIT Y IN THE HANDS OF THE APPELLANT. (B) SIMILARLY, SHRI P.B.MAHAJAN AND SHRI M.H.ANDUR E HAD OFFERED THE AMOUNT OF UDI FOR THE FUNDS INVOLVED IN THE TRANSACTI ONS RECORDED IN THE DIARIES AS THEIR UDI AND THEY HAVE ALSO PAID THE T AXES. THE SAME HAS BEEN ASSESSED ON PROTECTIVE BASIS BY THE AO. (C) THE VARIOUS INVESTMENTS POINTED OUT BY THE AO IN THE NAME OF SHRI ANDURE AND SHRI MAHAJAN, CLOSE RELATIVE OF THE APPEL LANT ARE BELONGING TO THEM ONLY. ALL THE TRANSACTIONS RELATED TO IMMOVAB LE PROPERTY ARE THROUGH REGISTERED DOCUMENTS ONLY. THEY ARE PAYING TH E MUNICIPAL TAXES ALSO IN THEIR INDIVIDUAL NAMES. THE RENT INCOME HAS ALSO BEEN SHOWN IN THEIR INDIVIDUAL HANDS AND THEY ARE ASSESSED SEPA RATELY ON SUBSTANTIVE BASIS. THE AO HAS NOT MADE ANY CASE OF THEM BEING BENAMIDAR OF THE APPELLANT. THEREFORE, THERE IS NO G ROUND FOR CONSIDERING THE INVESTMENTS IN THEIR NAMES AS APPEARING IN THE RUNNING ACCOUNT AS UDI IN THE HANDS OF THE APPELLANT. (D) THE AO HAS ALSO POINTED OUT THAT ON CERTAIN PAGES OF THE DIARIES THERE ARC DEDUCTIONS (MINUS FIGURES) ON ACCOUNT OF PER SONAL EXPENDITURE OF THE APPELLANT (PLEASE SEC PARA 6(XV)( L (O 12) OF THE ASSESSMENT ORDER). AS I HAVE ALREADY MENTIONED, ALL THE SE TRANSACTIONS RECORDED IN THESE DIARIES ARE RELATED TO SHRI M.B. PA TIL, SHRI M.H. ANDURE AND P.B. MAHAJAN. THEREFORE, THE QUESTION OF CONSIDE RING THEM AS THE PERSONAL EXPENSES OF THE APPELLANT DOES NOT ARISE. ALL THE THREE PERSONS HAVE ALSO CONFIRMED THAT THESE TRANSACTIONS BELONGED T O THEM. THERE ARE SEVERAL EXAMPLES TO PROVE THIS POINT. THERE ARE FURTHER INSTANCES WHICH CONFIRM THAT THE TRANSACTIONS MENTIONED IN TH E DIARIES ARE RELATED TO THE RESPECTIVE OWNERS AND NOT TO THE APPELLANT WHIC H IS EVIDENT AS UNDER: 28 (I) MR.ANDURE HAS PURCHASED SHARE CERTIFICATE FRO M CHHATRAPATI SAMBHAJI RAJE SUGAR FACTORY. IT IS MENTIONED IN DIARY IN RELE VANT PAGE OF MR. ANDURE. THE AMOUNT PAID BY MR. M.H.ANDURE IS BY CHEQ UE. AMOUNT OF RS.L LAKH SHARE AMOUNT IS DEDUCTED FROM HIS ACCOUNT OF SANCHAR CONSTRUCTION COMPANY OF MR.ANDURE. IT IS SHOWN IN R EGULAR RETURNS OF MR.ANDURE. (II) MR.PRASHANT MAHAJAN HAS PURCHASED AMBASSADOR CAR FOR RS.3.55 LAKH. IT IS APPEARING IN RELEVANT PAGE OF MR.ANDURE, WHO IS WORKING IN SANCHAR CONSTRUCTION CO. AND MEGH SEEDS COMPANY PRI VATE LIMITED. (III) MR. B.B. PATILS NAME IS MENTIONED WHO IS BROTH ER OF MR. M.B. PATIL, MR. FAKIRE IS ACCOUNTANT WITH MR. M.B. PATIL WHOSE NA ME ALSO FIGURES IN THE DIARY. FURTHER, THE NAME OF BROTHER IN LAW OF MR.B.B. PATIL, SHRI SHAILESH ALSO FINDS PLACE IN THE DIARY. MR. TUKARAM A PPEARING IN DIARY IS WORKING AS SUPERVISOR WITH SHRI M.B. PATIL. (E) THERE IS ALSO ONE TRANSACTION REGARDING THE ADVANCES GIVEN BY SHRI M.H.ANDURE TO ONE SHRI G.MAHAJAN FOR RS.22.82 LAKHS . IF WE ACCEPT THE THEORY OF THE AO, THE LOAN MUST HAVE BEEN GIVEN BY T HE APPELLANT TO SHRI G.MAHAJAN THEN WHY THIS TRANSACTION WAS ENTERED IN MR. ANDURE'S ACCOUNT ONLY AND SIGNED BY BOTH THE PARTIES I.E SHRI ANDURE AND MAHAJAN. FURTHER SHRI M.H. ANDURE HAS ADMITTED THIS TRANSACT ION AS HIS UDI IN HIS BLOCK RETURN. (F) IT IS ALSO TO BE MENTIONED HERE THAT SIMULTAN EOUS SEARCH HAS BEEN CONDUCTED AT THE BUSINESS PREMISES OF SHRI M.B.PATI L AND DURING THE COURSE OF SEARCH CERTAIN LOOSE PAPERS WERE FOUND AND SEIZED (BUNDLE NO. 14 LOOSE PAPERS 1 TO. 21). ALL THESE PAPERS INDICATE THAT SHRI PATIL IS DOING CONTRACT WORK IN THE NAMES OF OTHER PERSONS EITHER IN THE NAME OF MAZDOOR CO-OP. SANSTHA OR SOCIETY OF UNEMPLOYED GRAD UATES OR IN VARIOUS OTHER NAMES WHICH HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT (PAGE 143 OF APPRAISAL REPORT). IT IS ALSO WOR TH MENTIONING HERE THAT THESE NAMES WERE ALSO FOUND NOTED IN THE DIARY MAINTAINED BY THE APPELLANT WHICH GOES TO PROVE BEYOND DOUBT THAT ENTR Y IN DIARY IN THE NAMES OF SHRI M.B. PATIL, ACTUALLY BELONG TO HIM AND CAN BE TAXED AS UDI IN HIS HANDS ONLY. (G) DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A O, SHRI R.M.KHISTE, ACIT CENTRAL), AURANGABAD HAS ATTENDED THE HEARING ON 11-10- 2004. THE LEARNED A.R. SHRI ASHOK PATIL WAS ALSO PRESEN T DURING THIS HEARING. DURING THE COURSE OF HEARING THE ASSESSING OFFI CER AGREED THAT MR. M.B.PATIL, MR.M.H.ANDURE & MR. P.B.MAHAJAN DURI NG THE COURSE OF SEARCH/POST SEARCH PROCEEDINGS HAS ACCEPTED THAT TH E TRANSACTIONS IN THE DIARIES A-67, A-68 AND A-71 BELONGS TO THEM AND THE APPELLANT HAS ALSO STATED IN HIS STATEMENT RECORDED U/S.132 (4) THAT T HE TRANSACTIONS RECORDED IN THE SAID DIARIES PERTAINS TO MR.M.B.PATIL , MR.M.H.ANDURE AND MR.PRASHANT MAHAJAN. THE ASSESSING OFFICER HAS FURTHER STATED THAT MR.M.B. PATIL, M.H.ANDURE AND PRASHANT MAHAJAN HAVE FILED THEIR AFFIDAVITS AND IN THE SAID AFFIDAVITS THEY HAVE ACCEP TED THEIR OWNERSHIP AND RESPONSIBILITY OF TRANSACTIONS RECORDED IN THE DIAR IES SEIZED FROM THE RESIDENCE OF THE APPELLANT. THE ASSESSING OFFICER H AS ALSO FURTHER STATED THAT THE DIRECTOR GENERAL, ANTI CORRUPTION BU REAU HAD CARRIED OUT ENQUIRIES IN RESPECT OF THE APPELLANT BEFORE SEARCH A ND ALSO AFTER SEARCH. THE SAID DEPARTMENT ALSO COLLECTED THE XEROX COPIES OF THE SEIZED MATERIALS, STATEMENTS OF THE APPELLANT AND RELATED P ERSONS FROM HIS OFFICE AND THEY ALSO STUDIED THE APPRAISAL REPORT DURING THE COURSE OF ENQUIRY CONDUCTED BY THEM AFTER SEARCH. THE ACB HAS NOT REGI STERED ANY CHARGE AGAINST THE APPELLANT. 29 AS FAR AS THE OTHER PERSONS STATED IN ANNEXURE-I ARE CO NCERNED, SHRI M.B.PATIL, HAS CONFIRMED THAT THESE ARE SUB-CONTRACTOR S WORKING WITH HIM AND CERTAIN PAYMENTS HAVE BEEN MADE TO THEM ON H IS BEHALF. HE HAS CONSIDERED THESE TRANSACTIONS WHILE COMPUTING THE UDI B EFORE THE SETTLEMENT COMMISSION. THE AO HAS NOT MADE ANY ENQUIR Y WITH OTHER PERSONS AS TO WHETHER TO FACT MENTIONED BY SHRI M.B .PATIL IS CORRECT OR NOT. AS I HAVE MENTIONED EARLIER THAT THESE TRANSACTI ONS RECORDED IN THESE DIARIES ARE RELATED TO MAINLY THREE PERSONS A ND THEY HAVE CONFIRMED THE TRANSACTIONS. THEREFORE, THE ADDITION M ADE BY THE AO ON ACCOUNT OF ADVANCES GIVEN TO VARIOUS PERSONS WHO ARE SUB -CONTRACTORS OF SHRI M.B.PATIL ON THE BASIS OF PRESUMPTION IS NOT T ENABLE. I DO NOT FIND ANY EVIDENCE ON RECORD TO SHOW THAT THE APPELLANT HA D ACTUALLY ADVANCED LOANS TO ASSOCIATES OF SHRI M.B. PATEL AND, THEREFORE, THE INFERENCE DRAWN BY THE AO IS NOT CORRECT. 3.113 FURTHER I FIND THAT THE AO HAS TREATED THE TRA NSACTIONS APPEARING IN THE SAID DIARIES IN THE HANDS OF THE APP ELLANT WHICH IS BASED ON THE PRESUMPTION THAT THE DIARIES WERE WRITTE N BY THE APPELLANT. AS HELD BY VARIOUS JUDICIAL AUTHORITIES, NO ADDITION CAN BE MADE BY THE AO AS UDI JUST ON THE BASIS OF PRESUMPTION A ND ESTIMATION. THE BURDEN OF PROOF IS OF IMPORTANCE ONLY WHERE BY REASON OF NOT DISCHARGING THE BURDEN WHICH WAS PUT UPON IT, A PARTY MUST EVENTUALLY FAIL. THE LAW OF BURDEN IS CANONIZED IN C OMMON LAW DOCTRINE : INCUMBIT PROBATION QUI DICIT NON QUI NEGAT (BURDEN LIES UPON ONE WHO ALLEGES AND NOT UPON ONE WHO DENY THE EXISTENCE OF A FACT). IN THE INSTANT CASE, THERE IS ABSOLUTELY NO EVIDENCE OR MATER IAL ON RECORD TO JUSTIFY THE SOURCE OF SUCH UNACCOUNTED INVESTMENT ALLEG ED TO HAVE BEEN MADE BY THE APPELLANT AND HENCE THE ADDITION SO MAD E BY THE AO TO THIS EFFECT IS NOT SUSTAINABLE. THERE IS ONE MORE IMPORTANT ASPECT WHICH REQUIRES FU RTHER DISCUSSION AS TO WHETHER ANY ADDITION CAN BE MADE IN THE HANDS OF THE APPELLANT U/S. 69 OF THE IT ACT AS UNEXPLAINED INVESTMENT OR UNEXPLAI NED LOAN OR ADVANCES WITHOUT ANY SOURCES OF INVESTMENTS / SOURCES OF FUNDS. TO ANSWER THIS, ONE HAS TO LOOK IN TO THE PROVISIONS OF SE C.69 OF THE IT ACT WHICH IS REPRODUCED AS UNDER: 'WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECOR DED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURC E OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURC E OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO, SATISFACTORY, THE VALUE OF THE INVESTMENTS M AY BE DEEMED TO BE THE INCOME OF THE APPELLANT OF SUCH FINANCIAL YEAR' THE PHRASEOLOGY OF SECTION 69, IN CREATING THE LEG AL FICTION, EMPLOYS THE WORD MAY AND NOT SHALL. THUS, THE UNSATISFACTO RINESS OF THE EXPLANATION DOES NOT, AND NEED NOT, AUTOMATICALLY R ESULT IN DEEMING THE VALUE OF THE INVESTMENT TO BE THE INCOME OF THE APP ELLANT. THAT IS STILL A MATTER WITHIN THE DISCRETION OF THE OFFICER. IN OTHE R WORDS, A DISCRETION HAS BEEN CONFERRED ON THE ITO UNDER SECTION 69 TO TRE AT THE SOURCE OF INVESTMENT AS THE INCOME OF THE APPELLANT IF THE EXPL ANATION OFFERED BY THE APPELLANT IS NOT FOUND SATISFACTORY AND THE SAID DI SCRETION HAS TO BE EXERCISED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCE S OF THE PARTICULAR CASE. THE AO IS NOT OBLIGED TO TREAT THE VALUE OF I NVESTMENTS AS INCOME IN EVERY CASE WHERE THE EXPLANATION OFFERED BY THE APPE LLANT IS FOUND TO BE NOT SATISFACTORY. 30 3.115 FURTHER, IT IS TO BE NOTED THAT THE SCHEME OF S ECTION 69 MAY ALSO BE READ BEFORE ANY ACTION CAN BE TAKEN. 'THE PHRASE OLOGY USED IN THIS SECTION GOES TO SHOW THAT BEFORE INVOKING THE PROVISIO N, AN INVESTMENT HAVING BEEN FACTUALLY MADE MUST BE CONCLUSIVELY ESTA BLISHED ON EVIDENCE. IT MUST BE INQUIRED AS TO WHETHER THERE I S EVIDENCE ON THE BASIS OF WHICH THE AO COULD HOLD THAT THE APPELLANT HAD E ITHER MADE THE INVESTMENT IN VARIOUS TRANSACTIONS RECORDED IN DIAR IES WAS THE OWNER OF ANY ASSET (FUND). IF THERE IS NO EVIDENCE AND SUCH A FINDING IS BASED ONLY ON SURMISES AND CONJUNCTURES, THEN THE IMPOSITION OF THE TAX WOULD BE WITHOUT THE AUTHORITY OF LAW AND LIABLE TO BE SET A SIDE. THERE IS NO CONVINCING EVIDENCE AVAILABLE ON RECORD ON WHICH TH E AO COULD SUPPORT HIS FINDING THAT THE APPELLANT HAD EITHER PAID FOR T HE VARIOUS TRANSACTIONS AND THEREBY MADE AN INVESTMENT OR THAT T HE APPELLANT WAS OTHERWISE THE OWNER OF THE ASSETS SO THAT ITS VALUE C OULD BE, IN THE ABSENCE OF A SATISFACTORY EXPLANATION FROM HIM REGA RDING THE SOURCE, BE TREATED AS HIS INCOME. IN EFFECT, THE AO HAD NO MAT ERIAL WHATSOEVER WHICH COULD PROVE THAT UNDISCLOSED INVESTMENT / ADVANCES ARE MADE BY APPELLANT. HERE REFERENCE IS MADE TO THE JUDGEMENT O F THE APEX COURT IN THE CASE OF P.K.NOORJAHAN VS CIT 237 ITR 570 WHEREIN APPROPRIATE TREATMENT TO THE UNEXPLAINED INVESTMENT BY THE AO W AS EXPLAINED. THE HON'BLE COURT WAS OF THE VIEW THAT THE AO COULD HOLD UNEXPLAINED INVESTMENT U/S. 69 PROVIDED IT IS BASED ON FACTS AND MA TERIAL ON RECORD TO PROVE THE SOURCE OF SUCH INVESTMENTS. THE FACTS OF TH E PRESENT CASE ARE SIMILAR TO THE CITED CASE (SUPRA). IN THE APPELLAN T'S CASE, EXCEPT THESE THREE DIARIES, NO UNEXPLAINED ASSETS WERE FOUND EXCE PT THE OSMANPURA HOUSE WHICH IS DEALT SEPARATELY IN GR. NO.3 OF THIS ORDER. THE APPELLANT IS A SENIOR GOVERNMENT OFFICER HAVING SALARY INCOME WHIC H IS DISCLOSED IN HIS REGULAR RETURN OF INCOME. THERE IS NO OTHER SOURCE O F INCOME. NO EVIDENCES WERE FOUND DURING THE COURSE OF SEARCH REGAR DING ANY OTHER SOURCES OF INCOME. THE FINDING GIVEN BY THE ACB WHICH IS ON RECORD ALSO SHOULD HAVE DISPELLED THE FOG OF SUSPICION IN THE MIND OF AO THAT THERE IS NO CASE FOR ANY DISPROPORTIONATE ASSETS FOUND WHICH B ELONGS TO THE APPELLANT. SO, WHEN THERE IS NO SOURCE OF INVESTMENT , THE QUESTION OF CONSIDERING THE TRANSACTIONS RECORDED IN THE SEIZED DIA RIES AS HIS UNEXPLAINED INVESTMENT / UDI IS JUST ON THE BASIS OF SUS PICION, THEREFORE, CANNOT BE UPHELD. THERE MAY BE A HUNDRED REASONS FOR SUSPICION OR PRESUMPTION BUT THESE CANNOT TAKE THE PL ACE OF EVIDENCE OF PROOF. THEREFORE, ON THE BASIS OF PRESUMPTION, THE TR ANSACTIONS CANNOT BE CONSIDERED AS UDI IN THE HANDS OF THE APPELLANT AND NO ADDITION CAN BE SUSTAINED ON THIS GROUND. 3.116 LAST BUT NOT THE LEAST IT IS WORTH MENTIONING HE RE THAT SUBSTANTIAL AMOUNT OF BALANCES APPEARING IN THE RUNNIN G ACCOUNTS OF SHRI M.H. ANDURE, SHRI P.B. MAHAJAN, HAVE BEEN DECL ARED AS THEIR UNDISCLOSED INCOME IN THEIR BLOCK RETURNS WHILE THE EN TRIES IN THE NAME OF SHRI M.B. PATIL AND HIS ASSOCIATES HAVE BEEN DECLARE D AS UDI IN HIS PETITION FILED BEFORE THE SETTLEMENT COMMISSION. ALL THE TRANSACTIONS RECORDED IN THESE DIARIES HAVE BEEN ADMITTED AND CORR ESPONDING UNDISCLOSED INCOME STANDS TAXED IN THE HANDS OF THE RESPE CTIVE PERSONS AS PER DETAILS GIVEN BELOW: I) M.H.ANDURE - UDI OF RS.98,63,500 [OFFERED IN BLO CK RETURN] II) P.B.MAHAJAN - UDI OF RS.68,07,139 [OFFERED IN T HE BLOCK RETURN] III) M.B. PATIL AND HIS ASSOCIATES - UDI OF RS.93,48,7 37 [OFFERED BEFORE SETTLEMENT COMMISSION] 31 3.117 THUS, IT CAN BE OBSERVED THAT SUBSTANTIAL AMO UNT OF UDI WHICH HAS BEEN ASSESSED AND TAXED IN THE HANDS OF THE APPELLA NT, STANDS DECLARED BY THE AFORESAID PERSONS AND, THEREFORE, DELETION OF THE A DDITION MADE IN THE HANDS OF THE APPELLANT DOES NOT CAUSE LOSS TO THE REVENUE TO THE EXTENT OF UDI DECLARED BY THE SAID PERSONS. I MAY MENTION HERE TH AT THE AFORESAID PARTIES MENTIONED ABOVE HAVE NOT MADE FULL DECLARATION OF T HE UDI AS QUANTIFIED AND TAXED IN THE HANDS OF THE APPELLANT AND, THEREF ORE, ANY SHORTFALL OF SUCH UDI SHALL BE DULY CONSIDERED IN THE APPEALS PE NDING BEFORE ME EXCEPT FOR SHRI M.B. PATIL. THUS, IN TOTALITY THE D EPARTMENT WOULD NOT HAVE ANY REVENUE LOSS IF THE ASSESSED UDI IN THE HANDS O F THE APPELLANT IS DELETED AND IS CONFIRMED IN THE HANDS OF SHRI M.H. ANDURE, SHRI B.B. MAHAJAN AND SHRI P.B. MAHAJAN. AS FAR AS THE CASE OF SHRI M.B. PATIL AND HIS ASSOCIATES GOES, I AM IN AGREEMENT WITH THE STAND OF THE DEPART MENT THAT THE ENTIRE TRANSACTION APPEARING IN THE SAID DIARIES IN THE NA ME OF SHRI M.B. PATIL SHOULD BE HELD AS UNDISCLOSED INVESTMENT WHICH IS A T PAR WITH THE ADMISSIONS MADE BY SHRI M.H. ANDURE AND SHRI P.B. M AHAJAN. A PETITION TO THIS EFFECT SHOULD BE MADE TO THE HON'BLE SETTLEMEN T COMMISSION, CONSEQUENT UPON MY FINDING GIVEN IN THIS ORDER. 3.118 IN THE LIGHT OF THE DETAILED DISCUSSION IN TH E PRECEDING PARAS, I AM TO HOLD THAT THE BALANCE OF RUNNING ACCOUNT IN THE NAM ES OF MR M.B. PATIL AND HIS ASSOCIATES, SHRI M.H.ANDURE AND SHRI P.B. MAHAJ AN. AS APPEARING IN DIARY A-67, 68 & A-71 CANNOT BE HELD TO BE ASSESSED AS UD I IN THE HANDS OF THE APPELLANT. THE DETAILS OF BALANCE OF SUCH RUNNING A CCOUNT APPEARING IN THE SAID DIARIES AS APPEARING IN ANNEXURE-1 TO THE ASSE SSMENT ORDER OF THE APPELLANT ARE REPRODUCED AS UNDER:- 1. SHRI M.B.PATIL RS. 7,26,11,000/- 2. ASSOCIATES OF SHRI M.B.PATIL RS. 1,22,82,784/ - 3. SHRI P.B.MAHAJAN RS. 66,00,000/- 4 SHRI M H ANDNRE RS. 43,07,500/- 5. ASSOCIATES OF MR. M.H. ANDURE RS. 24,82,700/- --------------------- TOTAL RS.9,82,83,984/- ---------------------- 3.120 AS FAR AS THE ADDITION WITH RESPECT TO THE RUNNI NG ACCOUNT M THE NAME OF SHRI M.B.PATIL AND HIS ASSOCIATES AMOUNTING TO RS. 8,48,93,784/- GOES, IT HAS ALREADY BEEN HELD IN THE PRECEDING PAR AS THAT THE SAME REPRESENTS UNACCOUNTED BUSINESS PROFITS OF SHRI M.B . PATIL WHICH IS SUB JUDICE BEFORE THE SETTLEMENT COMMISSION. DURING THE C OURSE OF APPELLATE PROCEEDINGS, THE AR POINTED OUT A MISTAKE IN QUANTIFY ING THE BALANCES OF RUNNING ACCOUNT IN THE NAME OF SHRI D.S. GOSALWAD, A SSOCIATE OF SHRI M.B. PATIL AS APPEARING IN ANNEXURE-I OF THE ASSESSMENT ORDER . THE AO AT ANNEXURE-A1 HAS TAKEN A CLOSING BALANCE OF RS.3360784/ - IN THE RUNNING ACCOUNT OF SHRI D.S. GOSALWAD AS APPEARING ON PAGE 10 OF ANNEXURE - A-67 WHICH INCLUDES OPENING BALANCE OF RS .25.37 LACS. WHILE AT THE SAME TIME HE HAS ALSO CONSIDERED CLOSING BAL ANCE IN THE NAME OF SHRI DIGA (SHORT NAME OF SHRI D.S. GOSALWAD) OF RS.25 .37 LACS APPEARING ON PAGE 13 OF ANNEXURE A-68. THUS, THE FIGURE OF RS .25.37 LACS HAS BEEN TAXED TWICE AS APPEARING IN THE NAME OF SHRI DIGA A ND SHRI D.S. GOSALWAD. I HAVE PERUSED THROUGH THE ENTRY APPEARING IN THE SAID DIARIES AND IS IN AGREEMENT WITH THE OBJECTION RAISED BY THE APPELLANT AND ACCORDINGLY THE TOTAL BALANCE OF THE RUNNING AC COUNT IN THE NAME OF SHRI M.B. PATIL AND HIS ASSOCIATES IS CORRECTED TO RS.8, 47,56,984/- AS AGAINST RS.8,72,93,984/- TAKEN BY THE AO. THE ERROR I N COMPUTING THE BALANCE 'OF RUNNING ACCOUNT OF THE ASSOCIATES OF SHRI M.B.PATIL WAS ALSO DULY CONSIDERED AND NECESSARY CORRECTIONS ARE DIRECTED TO BE MADE. AFTER CONSIDERING ALL THESE ASPECTS, THE CLOSING BALANC E OF THE RUNNING ACCOUNT OF RS. 8,48,93,784/- IN THE NAME OF M.B.PAT IL AND HIS ASSOCIATES 32 HELD AS UDI IN THE HANDS OF THE APPELLANT IS DIRECT ED TO BE DELETED ON ACCOUNT OF SPECIFIC REASONS IN MY APPELLATE ORDER A T RELEVANT PARAS. 3.121 I MAY CLARIFY THAT ON VERIFICATION OF THE FAC TS AND DOCUMENTS ON RECORD, I AM OF THE FIRM OPINION THAT THE TOTAL BAL ANCE OF RS. 8,48,93,784/- IN THE RUNNING ACCOUNT OF SHRI M.B.PA TIL AND HIS ASSOCIATES DOES NOT REPRESENT HIS GROSS UNACCOUNTED BUSINESS RECEIPTS AS CLAIMED BY HIM BEFORE THE SETTLEMENT COMMISSION. AFTER DUE CONSIDERATION TO THE SUBMISSIONS OF THE APPELLANT ON THIS ISSUE, I HAVE NO HESIT ATION TO HOLD THAT THE TOTAL BALANCE OF RS. 8,48,93,784/- ACTUALL Y REPRESENTED IS UNACCOUNTED INVESTMENTS IN THE. FORM OF LOANS AND AD VANCES AND THEREFORE, THE ENTIRE BALANCE OF RS. 8,48,93,784/- IS LIABLE TO BE TAXED AS UNDISCLOSED INCOME IN THE HANDS OF SHRI M.B. PATIL. 3.122 I MAY ALSO STATE HERE THAT THE NATURE OF ENTRY APPEARING IN THE ACCOUNT OF SHRI M.B.PATIL AND HIS ASSOCIATES ARE SIMILA R IN NATURE AND ITS PRESENTATION IN THE SEIZED DIARY IN COMPARISON TO RUN NING ACCOUNT OF SHRI M.H.ANDURE AND SHRI P.B.MAHAJAN AND, THEREFORE , THE TREATMENT GIVEN TO THE RUNNING OF SHRI M.H.ANDURE AND SHRI P. B.MAHAJAN IN TAXING THE CLOSING BALANCE AS UDI IN THEIR RESPECTIVE HANDS, A SIMILAR TREATMENT HAS TO BE ACCORDED TO THE ENTRIES APPEARING IN THE NA ME OF SHRI M.B.PATIL AND ASSOCIATES. THIS WOULD MAINTAIN PARITY IN GIVING SIM ILAR TREATMENT AND INTERPRETATION TO THE ENTRIES APPEARING IN THE SE IZED DIARY IN RESPECT OF THE SHRI M.B. PATIL IN COMPARISON TO OTHER PERSONS NAMED IN THE SAID DIARY,. PERUSAL OF THE RUNNING ACCOUNT IN THE NAME OF M.B.PATIL AS APPEARING IN DIARY A-67, 68 AND A-71 SHOWS THAT IT DO ES NOT CONTAIN THE REQUISITE DETAILS OF THE WORKSITE, NOR THE NAME OF THE PROJECTS, NAME OF THE AGENCIES ASSIGNING SUCH CONTRACTS AND FINALLY THE NAME OF THE PARTIES THROUGH WHOM THE SO CALLED CONTRACTS WERE EXECUTED. I N THE ABSENCE OF ANY SUCH INFORMATION AVAILABLE IN THE SAID RUNNING A CCOUNT OF MR. M.B.PATIL, IT CAN SAFELY BE CONCLUDED WITHOUT ANY IO TA OF-DOUBT THAT THE SAID ENTRIES IN THE RUNNING ACCOUNT OF SHRI M.B.PATIL APPEARING IN THE SEIZED DIARIES DID NOT REPRESENT THE GROSS CONTRACT RECE IPTS AS CLAIMED BY THE SAID PARTY BEFORE THE HON'BLE SETTLEMENT COMM ISSION. I MAY ALSO ADD HERE THAT SHRI M.B.PATIL IN HIS STATEMENT U/S 131 DATED 27.11.2001 HAS NOT BEEN ABLE TO SPECIFY THE NAME AND NATURE OF THE CONTRACT, SITES OF THE PROJECTS AS ALSO THE BANK ACCOUNT IN WHICH SUCH CON TRACT RECEIPTS WERE CREDITED AND THEREFORE, THE CLAIM OF GROSS RECE IPTS DOES NOT STAND JUSTIFIED. IT IS ALSO PERTINENT TO MENTION HERE THAT N O INDEPENDENT EVIDENCE WHATSOEVER WERE PRODUCED BEFORE THE AO OR B EFORE ME WHICH COULD PROVE THAT THE ENTRIES IN THE RUNNING ACCOUNT OF SHRI M.B.PATIL APPEARING IN THE SEIZED DIARY, ACTUALLY REPRESENTED U NDISCLOSED GROSS RECEIPTS FROM CONTRACTS. IN THE LIGHT OF ABOVE DISCUSSIO N, I AM, THEREFORE, FULLY CONVINCED THAT THE ENTRIES IN THE RUNNING ACCO UNT OF SHRI M.B.PATIL IN THE SEIZED DIARY A-67, A-68 AND A-71 ACTUALLY CON STITUTED HIS UNDISCLOSED INVESTMENTS IN THE FORM OF LOANS AND ADVANCE S AND, THEREFORE, THE TOTAL CORRECTED BALANCE OF RS.8,48,93 ,784/- AS APPEARING IN THE SAID DIARIES HAS TO BE ASSESSED IN FULL AS UDI IN TH E HANDS OF SHRI M.B. PATIL. A PETITION TO THIS EFFECT SHOULD BE MADE TO THE HON'BLE SETTLEMENT COMMISSION, CONSEQUENT UPON MY FINDING GIVE N IN THIS ORDER. 3.123 THE ASSESSING OFFICER HAD MADE ADDITION OF RS. 43, 07,500/- IN THE HANDS OF THE APPELLANT ON ACCOUNT OF CLOSING BALA NCE IN THE RUNNING ACCOUNT OF SHRI M.H. ANDURE APPEARING IN THE DIARY A-68 HELD TO BE THAT OF THE APPELLANT. FURTHER THE BALANCE OF RS.22,82, 700/- IN THE RUNNING ACCOUNT OF SRI GANGADHAR MAHAJAN APPEARING IN DIARY A-68 HAS ALSO BEEN TAXED IN THE HANDS OF THE APPELLANT AND LASTLY T HE RUNNING ACCOUNT BALANCES IN THE NAME OF SHRI RENU MAHAJAN AND SHRI S ANJAY MAHAJAN OF 33 RS.1 LAC EACH APPEARING IN DIARY A-71 HAS ALSO BEEN HE LD AS UDI IN THE HANDS OF THE APPELLANT. ALL THESE RUNNING ACCOUNT BAL ANCES TOTALING TO RS. 67,90,200/- (RS.43,07,500/- + RS.22,82,700/-) ADDED B Y THE AO IN THE HANDS OF THE APPELLANT IS HEREBY DIRECTED TO BE DELET ED ON ACCOUNT OF SPECIFIC REASONS MENTIONED IN THE PRECEDING PARAS OF TH IS ORDER. HOWEVER, CONSIDERING THE FACT THAT THE TOTAL BALANCE OF RUNNING ACCOUNT AMOUNTING TO RS.67,90,200/- HAVE NOT BEEN EXPLAINED IN THE HANDS OF SHRI M.H.ANDURE AND HIS ASSOCIATES, IT IS HELD TO BE UDI OF SHRI M.H. ANDURE. APPROPRIATE DECISION SHALL BE TAKEN IN THE RE LEVANT GROUNDS OF APPEAL OF SHRI M.H. ANDURE TO TAX THE AFORESAID UNDI SCLOSED INCOME OF RS. 67,90,200/- ON SUBSTANTIVE BASIS, AFTER DUE CONSIDER ATION TO THE SUBMISSIONS OF THE SAID PARTY. 3.124 LASTLY THE AO HAS ASSESSED UNDISCLOSED INCOM E OF RS.64,00,000/- IN RESPECT OF THE BALANCE OF THE RUNNING ACCOUNT AP PEARING IN THE NAME OF SHRI PRASHANT MAHAJAN IN DIARY A-67. THE AO HAS ALS O ASSESSED RS.2,00,000/- TOWARDS CAR ADVANCE APPEARING IN THE NAME OF SHRI PRASHANT MAHAJAN. ALL THESE ADDITIONS TOTALING TO RS.6 6,00,000/- MADE IN THE HANDS OF THE APPELLANT BY THE AO IS DIRECTED TO BE DELETED ON ACCOUNT OF SPECIFIC REASONS MENTIONED IN THE PRECED ING PARAS OF THIS ORDER. HOWEVER, THE SOURCE OF INVESTMENT AS APPEARING IN THE SAID DIARY COULD NOT BE EXPLAINED BY SHRI PRASHANT MAHAJAN AND HAS ACCORDINGLY BEEN OFFERED AS HIS UDI IN THE BLOCK RETURN. ACCORDIN GLY APPROPRIATE DECISION SHALL BE TAKEN IN THE RELEVANT GROUNDS OF APPEAL OF SHRI P.B. MAHAJAN TO TAX THE AFORESAID UNDISCLOSED INCOME OF RS. 66,00,000/- ON SUBSTANTIVE BASIS, AFTER DUE CONSIDERATION TO THE S UBMISSIONS OF THE SAID PARTY. 3.125. IN VIEW OF THE DISCUSSIONS IN THE PRECEDING PARA S I AM OF THE CONSIDERED VIEW THAT THE CLOSING BALANCE OF THE RUNNI NG ACCOUNT IN THE NAME OF SHRI M.B. PATIL AND HIS ASSOCIATES, SHRI B. B. MAHAJAN, SHRI P.B. MAHAJAN AND SHRI M.H. ANDURE AS APPEARING IN THE DI ARIES A-67, 68 & 71 CANNOT BE CONSIDERED AS UDI OF THE APPELLANT. THERE FORE, THE TOTAL ADDITION OF RS.9,82,83,984/- ON ACCOUNT OF SUCH RUNNI NG ACCOUNT IN THE DIARIES ASSESSED AS UDI IN THE HANDS OF THE APPELLAN T BY THE AO IS HEREBY DELETED. THE APPEAL ON GROUND NO. 1 & 2 IS HENCE AL LOWED. 6.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CHA LLENGED THE ORDER OF THE CIT(A). SHE SUBMITTED THAT THE DIARIE S FOUND AT THE PREMISES OF THE ASSESSEE WERE WRITTEN BY THE ASSESS EE HIMSELF AND INCLUDE ENTRIES CONTAINING ASSESSEES OWN EXPENDITU RE INCLUDING PAYMENT OF HIS MOBILE BILLS ETC. EXPENDITURE OF HIS WIFE AND SON ETC. IT ALSO INCLUDES ENTRIES OF HIS RELATIVES WHO WERE ALSO COVERED U/S.132, AND WHO HAVE ACCEPTED SUCH LOANS FROM SHRI JALKOTE AND A PAYMENT 34 SCHEDULE ALONG WITH PENAL INTEREST WAS ALSO FOUND. SUCH ENTRIES HAVE BEEN COUNTERSIGNED BY THE DEBTORS IN THE DIARY ITSE LF. SHE SUBMITTED THAT SHRI P.B. MAHAJAN IN HIS STATEMENT RECORDED U/ S.132(4) ON THE DATE OF SEARCH HAD INITIALLY ACCEPTED THAT HE HAS T AKEN LOANS OF RS.64.00 LAKHS FROM MR. JALKOTE AND HIS SIGNATURES ON THE DOCUMENT WERE OBTAINED BY THE ASSESSEE HIMSELF AS SECURITY. HOWEVER, IN THE LATER PART OF THE SAME STATEMENT HE CHANGED HIS STA TEMENT AND ACCEPTED THAT THE MONEY IS HIS OWN. SHE SUBMITTED THAT IT WAS NEVER PROPERLY EXPLAINED BY SHRI P.B. MAHAJAN AS TO HOW A ND WHY HE HAD GIVEN SUCH A VOLUNTARY STATEMENT INITIALLY. 7.1 SHE SUBMITTED THAT THE ENTRIES, SPREAD OVER A P ERIOD OF 3 YEARS HAVE BEEN WRITTEN BY THE ASSESSEE AT WHATEVER PLACE HE WAS POSTED. SHE SUBMITTED THAT ALTHOUGH MR.M.B. PATIL WAS NEVER ASKED ANY QUESTION DURING THE COURSE OF SEARCH ABOUT THE DIAR IES, HOWEVER, HIS STATEMENT WAS RECORDED U/S.131 AND HE WAS UNABLE TO ANSWER ANY QUERY REGARDING THE ENTRIES IN THE DIARY SUCH AS NA MES OF THE PEOPLE TO WHOM CONTRACTS/SUB-CONTRACTS WERE GIVEN, NATURE OF SUCH DEBTS AND PAYMENTS ETC. IN VIEW OF THE ABOVE THE LOGICAL CON CLUSION THAT ARISES IS THAT THE DIARIES CONTAIN ENTRIES OF SHRI JALKOTE S OWN MONEY AND WRITTEN BY HIM WITH THE INTEREST AND METICULOUSNESS RESERVED FOR HANDLING ONES OWN MONEY. SHE SUBMITTED THAT THE P RESUMPTION U/S.132(4A) IS IN FAVOUR OF THE REVENUE AND THE ASS ESSEE IN THE INSTANT CASE HAS NOT DISCHARGED THE SAME PROPERLY. SHE SUBMITTED THAT THE FINDING OF HONBLE SETTLEMENT COMMISSION IN THE CASE OF SHRI M.B. PATIL CANNOT BE APPLIED TO THE CASE OF THE ASS ESSEE. SHE ALSO RELIED ON THE FOLLOWING DECISIONS: 35 1. ITO VS. C.H. ATCHAIAH REPORTE DIN 218 ITR 239 (SC) 2. CIT VS. A.J. JAIN REPORTED IN 349 ITR 236 (DELHI) 3. GUPTA PERFUMERS (P) LTD. VS. INCOME TAX SETTLEMENT COMMISSION REPORTED IN 348 ITR 86 (DELHI) 4. VINOD PRAKASH SAXENA VS. UOI REPORTED IN 253 CTR 525 (M P) 5. ITO VS. RADHA KRISHNAN REPORTED IN 254 ITR 561 (SC) 6. LALJI HARIDAS VS. ITO REPORTED IN 43 ITR 387 (SC) 7. ITO VS. BACHU LAL KAPOOR REPORTED IN 60 ITR 74 8. SOHAN SINGH VS. CIT REPORTED IN 158 ITR 174 (DELHI) REFERRING TO THE GROUNDS RAISED BY THE REVENUE SHE SUBMITTED THAT THE GROUNDS ARE SELF-EXPLANATORY. THEREFORE, THE LD.CI T(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9,82,83,98 4/- MADE BY THE AO IN THE HANDS OF THE ASSESSEE AS HIS UNDISCLOSED INV ESTMENT. SHE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD.CIT( A) BE REVERSED AND THAT OF THE AO BE RESTORED. 8. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). REFERRING TO PA GE 102 OF THE PAPER BOOK HE REFERRED TO THE STATEMENT OF SHRI JAL KOTE RECORDED U/S.132(4) AND SUBMITTED THAT SHRI JALKOTE IN THE S AID STATEMENT HAD SUBMITTED THAT THESE TRANSACTIONS ARE PERTAINING TO SHRI M.H. ANDURE, SRI MAHAJAN ETC. AND THE HANDWRITING PERTAINS TO H IM. REFERRING TO PAGE 103 OF THE PAPER BOOK HE SUBMITTED THAT THE AS SESSEE HAS ADMITTED THAT ABHINAV IS ALSO ON ACCOUNT OF SHRI M.B. PATIL. REFERRING TO PAGE 95 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE REPLY OF THE ASSESSEE TO QUESTION NO.6 TO 8 WHERE HE HAD STATED THAT HE HAS NOT GIVEN OR TAKEN ANY LOAN FROM SHRI M.B. PATIL. REFERRING TO PAGE 117 (BACKSIDE) OF THE PAPER BOOK HE SUBMITTED THAT THE ASSESSEE, WHEN CONFRONTED WITH THE REPLY OF SHR I P.B. MAHAJAN, HAS CATEGORICALLY STATED THAT HE DOES NOT AGREE WIT H THE REPLY OF SHRI MAHAJAN. 36 8.1 REFERRING TO PAGE 110 OF THE PAPER BOOK HE SUBM ITTED THAT THE ASSESSEE HIMSELF HAS MENTIONED THE CODED FIGURES. HE SUBMITTED THAT THE ASSESSEE HAS CATEGORICALLY STATED THAT HE HAS N EVER GIVEN ANY FUNDS AS REPRESENTED IN THE DIARIES. REFERRING TO THE ST ATEMENT OF SHRI P.B. MAHAJAN RECORDED U/S.132(4), COPIES OF WHICH ARE PL ACED AT PAPER BOOK PAGE 250 TO 284, HE SUBMITTED THAT SHRI P.B. M AHAJAN IN HIS REPLY TO QUESTION NO.12 HAS CLARIFIED THAT HE HAS N O FINANCIAL OR BUSINESS RELATIONSHIP WITH SHRI JALKOTE. HE HAS TR ANSACTIONS ONLY WITH SHRI M.H. ANDURE. REFERRING TO QUESTION NO.21 AT P AGE 265 OF THE PAPER BOOK HE SUBMITTED THAT SHRI P.B. MAHAJAN HAD INITIALLY STATED THAT HE HAS TAKEN LOAN OF RS.64 FROM JALKOTE, HOWEV ER, IN THE SAME STATEMENT IN QUESTION NO.41 ON PAGE 282 HE HAS ADMI TTED THAT THE EARLIER ANSWER THAT HE HAS TAKEN LOAN FROM JALKOTE IS WRONG AND THAT THE MONEY IS HIS OWN AND ACCORDINGLY HE HAS DECLARE D THIS ADDITIONAL INCOME AS PER PAPER BOOK PAGE 283. 8.2 HE SUBMITTED THAT SHRI MAHAJAN HAS GIVEN CONTRA DICTORY REPLIES IN THE STATEMENT AND HAS CORRECTED HIMSELF ULTIMATE LY. THEREFORE, THE STATEMENT HAS TO BE CONSIDERED AS A WHOLE AND AS PE R WHICH IT CAN BE INFERRED THAT HE HAS NEVER CATEGORICALLY STATED THA T HE HAS TAKEN FUNDS FROM SHRI JALKOTE. REFERRING TO THE STATEMENT RECO RDED U/S.132(4) OF SHRI M.H. ANDURE, COPIES OF WHICH ARE PLACED AT PAP ER BOOK PAGES 134 TO 163, HE SUBMITTED THAT IN THE STATEMENT SHRI M.H. ANDURE, IN HIS REPLY TO QUESTION NO.31 (PAPER BOOK 148), HAS S TATED THAT HE HAS ONLY ONE FINANCIAL TRANSACTION WITH SHRI JALKOTE AN D THAT IS SALE OF HIS HOUSE AT OSMANPURA. NOWHERE IN THE STATEMENT HE HA S ADMITTED THAT HE HAS TAKEN ANY FUNDS FROM SHRI JALKOTE. REFERRIN G TO PAGE 160 OF 37 THE PAPER BOOK HE SUBMITTED THAT SHRI M.H. ANDURE I N HIS REPLY TO QUESTION NO.53 HAS MADE A DECLARATION OF VARIOUS AS SETS FOUND IN HIS OWN HANDS. HE ACCORDINGLY SUBMITTED THAT MR. ANDUR E ALSO HAS NO WHERE MENTIONED IN THE STATEMENT THAT HE HAD TAKEN FUNDS FROM MR.JALKOTE. 8.3 HE SUBMITTED THAT SHRI M.B PATIL WAS NEVER ASKE D ANY QUESTION U/S.132(4) ABOUT THE DIARIES FOUND DURING THE COURS E OF SEARCH FROM THE PREMISES OF THE ASSESSEE. REFERRING TO THE STA TEMENT RECORDED U/S.131 OF SHRI M.B. PATIL DURING THE PERIOD FROM 0 9-12-2001 TO 21- 01-2002, COPIES OF WHICH ARE PLACED AT PAPER BOOK P AGES 303 TO 315, HE SUBMITTED THAT SHRI M.B. PATIL IN HIS REPLY TO Q UESTION NO.72 HAS ACCEPTED THAT THE NAMES OF VARIOUS PERSONS APPEARIN G IN THE DIARIES ARE HIS EMPLOYEES OR SUB-CONTRACTORS. 8.4 REFERRING TO THE SAID STATEMENT HE SUBMITTED TH AT IN HIS REPLY TO QUESTION NO.19 (PAPER BOOK 308) SHRI M.B. PATIL HAS STATED THAT THE FIGURES ARE THE TOTAL CONTRACT WORKS GIVEN TO SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN. SHRI PATIL IN THE SAID STATEMEN T HAS IDENTIFIED THE FIGURES WHICH REPRESENT THE CONTRACT RECEIPTS OR MA CHINERY HIRED BY THE AUTHORITIES, THE FIGURES OF HIS SUB CONTRACTORS ETC. HE SUBMITTED THAT SHRI M.B. PATIL, AFTER ADMITTING THAT ALL THE TRANSACTIONS MENTIONED IN THE DIARIES ARE HIS OWN TRANSACTIONS, FILED A PETITION BEFORE THE HONBLE SETTLEMENT COMMISSION ADMITTING THE INCOME THEREIN. HE SUBMITTED THAT THE HONBLE SETTLEMENT COMMISSION HAS PASSED A FINAL ORDER REJECTING THE THEORY OF THE AO THAT THE DIARIES REFLECT THE TRANSACTIONS BETWEEN PATIL GROUP AND JA LKOTE GROUP. HE SUBMITTED THAT THE HONBLE SETTLEMENT COMMISSION HA S HELD THAT THE 38 ENTRIES IN THE DIARY BASICALLY REFLECT THE CONTRACT RECEIPTS OF PATIL GROUP AND THEIR INVESTMENTS. THEY HAVE CONFIRMED O NLY ONE ENTRY PERTAINING TO THE ASSESSEE, I.E. THE CONSTRUCTION O F THE HOUSE AT OSMANPURA. OTHER ASSETS HAVE BEEN CONSIDERED TO BE BELONGING TO SHRI P.B. MAHAJAN, SHRI M.H. ANDURE AND SHRI M.B. P ATIL ETC. REFERRING TO THE FOLLOWING DECISIONS HE SUBMITTED T HAT IN ALL THESE DECISIONS IT HAS BEEN HELD THAT THE VIEW TAKEN BY O NE AUTHORITY ON THE FACTS SHOULD BE FOLLOWED BY THE OTHER AUTHORITIES A LSO. I. ACIT VS. SMT. PARBHJOT KAUR 97 TTJ 796 II. KINETIC HONDA 77 ITD 393 (ITAT PUNE) III. RAJMAL LAKHICHAND 79 ITD 84 (ITAT PUNE) IV. DISTRICT SUPERINTENDENT OF POLICE, CHENNAI V. K. INB ASAGARAN [2006] 282 ITR 435(SC) 8.5 EVEN ON MERIT ALSO HE SUBMITTED THAT DURING THE COURSE OF THE SEARCH SHRI JALKOTE HAD STATED THAT HE HAD WRITTEN THE DIARIES ON THE REQUEST OF HIS FATHER-IN-LAW SHRI BALIRAM B. MAHAJA N. HE HAS NOT ACCEPTED ANYWHERE IN THE STATEMENT THAT THE TRANSAC TIONS IN THE DIARIES ARE HIS ADVANCES TO VARIOUS PERSONS. THE LD. AUTHO RISED REPRESENTATIVE IN THE WRITTEN SUBMISSION FILED EXPL AINED IN DETAIL AS TO WHY THE VARIOUS ENTRIES SHOWN IN THE DIARIES DO NOT REPRESENT THE ADVANCES GIVEN BY SHRI JALKOTE TO VARIOUS PERSONS W HICH ARE AS UNDER: 1] DURING THE COURSE OF SEARCH, SHRI JALKOTE STATED T HAT HE HAD WRITTEN THE DIARIES ON THE REQUEST OF HIS FATHER IN LA W, SHRI. B. B. MAHAJAN. HE HAS NOT ACCEPTED ANY WHERE IN THE STATEME NT THAT THESE TRANSACTIONS IN THE DIARIES ARE HIS ADVANCES TO THE VARI OUS PERSONS. IN FACT, HE WAS INFORMED THAT SHRI P. B. MAHAJAN HAS STA TED THAT RS. 64 LAKHS WERE ADVANCED BY SHRI JALKOTE TO HIM (PAGE NO. 116, 116 (BACKSIDE) BUT STILL, HE AFFIRMED THAT HE HAD NOT GIVEN ANY SUCH AMO UNT TO SHRI MAHAJAN. SHRI ANDURE IN THE STATEMENT U/S.132(4) (PAGE NO.146 (Q.NO.31) HAS CONFIRMED THAT THE TRANSACTIONS IN THE DIARIES IN HIS A CCOUNTS ARE HIS TRANSACTIONS AND HE ALSO DID NOT MAKE ANY STATEMENT THA T THESE ARE ADVANCES FROM SHRI JALKOTE TO HIM. SHRI P B MAHAJAN IN THE STATEMENT ON (PAGE NO.265) HAD STATED THAT RS.64,00,000/- WERE ADV ANCED BY SHRI JALKOTE TO HIM BUT LATER ON, AT THE END OF THE STATE MENT HE CORRECTED HIMSELF AND OFFERED RS. 64 LACS AS HIS INCOME. THE POINT TO BE NOTED IS THAT IN THE BEGINNING OF THE STATEMENT, ON (PAGE 255 Q.NO.12), HE HAD CLEARLY STATED THAT HE HAD NO FINANCIAL TRANSACTIONS W ITH SHRI JALKOTE. IN THIS CONTEXT, DURING THE SEARCH, SHRI PATIL WAS NOT ASK ED ANY QUESTION AT 39 ALL IN HIS STATEMENT U/S. 132(4). THE ASSESSEE RELIES UPON THE DECISION IN 71 ITD 245 AND 56 TTJ 460 FOR THE PROPOSITION THAT T HE STATEMENT SHOULD BE CONSIDERED AS A WHOLE AND NOT IN PARTS AND AC CORDINGLY, IT IS SUBMITTED THAT SHRI MAHAJAN HAVING DECLARED RS. 64 LA CS AS HIS INCOME, IN THE SAME STATEMENT, HIS VERSION THAT HE HAD TAKEN T HE AMOUNT FROM SHRI JALKOTE SHOULD NOT BE ACCEPTED. 2] DURING THE COURSE OF THE SEARCH OPERATIONS ON THESE PERSONS, NO EVIDENCE WAS FOUND THAT THESE PERSONS HAVE TAKEN FUNDS F ROM SHRI JALKOTE. NO SECURITY, NO WRITTEN AGREEMENTS, NO CUSTOD Y OF TITLE DEEDS OF THEIR PROPERTIES, NO MORTGAGE, VIRTUALLY NO PROOFS W ERE FOUND WITH SHRI JALKOTE TO ESTABLISH THAT SHRI JALKOTE HAD ADVANCED T HE FUNDS TO THEM. 3] IN THE CASE OF SHRI JALKOTE, THE ASSETS FOUND WERE C ASH OF RS. 1,11,500/- AND JEWELLERY OF RS. 4,46, 111/-. THUS, IF SHRI. JALKOTE HAS ADVANCED THE FUNDS TO THE EXTENT OF RS. 11 CRS. AS MENT IONED IN THE DIARIES, CORRESPONDINGLY SOME LARGE AMOUNT OF WEALTH W OULD HAVE BEEN DETECTED WITH HIM DURING THE SEARCH. THIS IS NOT THE CASE. 4] THE RELEVANT DOCUMENTS IN REGARD TO THE PROPERTI ES AT APNA BAZAR, JALNA ROAD, LAND AT MIT MITTA, LAND AT PADEGAON, RE NUKA BUNGALOW, FLAT AT MUMBAI, ETC.ETC. WHICH WERE MENTIONED IN THE DIA RIES WERE NOT FOUND WITH SHRI JALKOTE AT ALL. IF THEY WERE THE BENAMI P ROPERTIES OF SHRI JALKOTE, AT LEAST ALL THESE DOCUMENTS WOULD HAVE BEEN IN THE CUSTODY OF SHRI JALKOTE. THUS, JUST BECAUSE THE PROPERTIES FIND A MENTION IN THE DIARIES, THEY CANNOT BE CONSIDERED TO BE BELONGING TO SHRI JALKOTE. SECONDLY, EVEN SHRI JALKOTE WAS NOT ENJOYING THESE P ROPERTIES FOR HIMSELF AS HE WAS NOT IN POSSESSION OF ANY OF THESE PROPERT IES. 5] THESE DIARIES WERE WRITTEN AT THE INSTANCE OF SHR I. B. B. MAHAJAN, FATHER IN LAW OF SHRI JALKOTE. THEY INCORPORATE THE CONTRACT RECEIPTS FROM CERTAIN CONTRACTS (ROAD REPAIRS, SIDE GUTTER CONST RUCTIONS, CULVERTS, SCRAPPING OF BURNS, PATCH WORK, REPAIRS TO BR IDGES, SMALL IRRIGATION CONTRACTS IN MARATHWADA REGION) OF SHRI. M. B. PATIL WHICH WERE TAKEN BY HIM FROM LABOUR CO OPERATIVE SOCIETIES AND THE RECEIPTS WERE IN CASH AND PART OF THESE WORKS WAS SUBCONTRACTED B Y HIM TO SHRI. ANDURE AND SHRI. P. B. MAHAJAN. SHRI. JALKOTE WAS RE QUESTED BY HIS FATHER INLAW BECAUSE ON ONE SIDE THE SUBCONTRACTORS WER E HIS BROTHERS IN LAW AND ON THE OTHER SIDE, WAS SHRI PATIL, CONTRAC TOR WHO WAS HIS COLLEGE FRIEND. TO AVOID ANY DISPUTES BETWEEN THESE PE RSONS, SHRI B. B. MAHAJAN HAD ASKED SHRI JALKOTE TO WRITE THE DIARIES G IVING THE DETAILS OF TRANSACTIONS AND EXPENSES OF ALL THESE PERSONS FROM THESE C ONTRACTS AS HE WAS RESPECTED BY ALL THESE CONCERNED PERSONS. AS REGAR DS, SHRI MAHAJAN AND SHRI ANDURE, THEIR INVESTMENTS / EXPENSE S WERE ALSO NOTED BY SHRI. JALKOTE. THE FACT THAT THE CONTRACTS WERE TAKEN BY SHRI PATIL FROM VARIOUS LABOUR CO OPERATIVE SOCIETIES IS MEN TIONED IN PARA NO. 2.3 ON PAGE 5 & 6 OF THE CIT(A] ORDER. EVEN THE RELEVANT PAPERS OF THE CONTRACTS AWARDED TO SUCH SOCIETIES/GRADUATE ENGINE ERS WERE FOUND DURING THE SEARCH AT THE PREMISES OF SHRI PATIL, THESE SOCIETIES/GRADUATE CIVIL ENGINEERS WERE REQUIRED TO CO MPLETE THESE WORKS ON THEIR OWN BUT THEY DID NOT HAVE ALL THE FA CILITIES, MAN POWER, FUNDS ETC., WITH THEM, THEY HAD GIVEN CERTAIN PARTS O F THE CONTRACTS TO SHRI M.B.PATIL WHO WITH THE HELP OF VARIOUS PERSONS GO T THEM EXECUTED. THIS IS THE REASON WHY THE RECEIPTS WERE IN CASH AND NOT BY CHEQUES. A CERTAIN NO. OF CONTRACTS WERE ALSO RECEIVED BY HIM FR OM A FEW SUB- CONTRACTORS FOR PARTICULAR JOBS LIKE : MACHINERY HIRE CHARGES, HOT MIX PLANT, AND OTHER EQUIPMENTS AND SIMILAR JOBS FOR WHICH THE ANDURE/PB MAHAJAN RECEIVED THE RECEIPTS FROM SUCH PERSONS WHICH ARE SHOWN IN THE DIARIES. 40 6. AFTER THE SEARCH, IT DEPT. INFORMED ANTI CORRUPTI ON BUREAU E EVIDENCES FOUND RELATING TO SHRI JALKOTE AND THEY CO NDUCTED ENQUIRIES, WENT THROUGH ALL THE DOCUMENTS FOUND AND THE FINDING S OF THE SEARCH AND THEY CLOSED THE ENQUIRIES AGAINST SHRI JALKTOE (PA RA NO.3.27 & 3.30 ON PAGE 13-16 OF CIT(A) ORDER). 7] SHRI. JALKOTE HAS FILED THE AFFIDAVIT (PAGE NO. 714) OF SHRI M. B. PATIL IN THIS REGARD [PARA 3.439[III) ON PAGE 26 OF CIT[A] OR DER] AND THE A.O. HAS NOT EVEN CROSS EXAMINED SHRI M. B. PATIL ON THIS AFFID AVIT AND HENCE, IN VIEW OF THE DECISION IN THE CASE OF 30 ITR 181, THE A FFIDAVIT OF SHRI. PATIL THAT THE DIARIES REFLECTED THE CONTRACT RECEIPTS SHOUL D BE ACCEPTED. 8] IN THE DIARIES, WE HAVE GIVEN THE NATURE OF VARI OUS TRANSACTIONS NOTED THEREIN. THEY WOULD BE ANALYSED AND DISCUSSED DUR ING THE HEARING. THE NATURE OF TRANSACTIONS ARE SUCH AS PAYMENT S TO SUB CONTRACTORS, PAYMENTS TO THEIR RELATIVES, RECEIPTS FROM VARIOUS CONTRACTS, PAYMENT FOR THEIR EXPENSES, THEIR DIWALI E XPENSES ON GIFTS, ETC. ETC. AND WHICH WILL NOT AMOUNT TO ADVANCES FROM SHRI JALKOTE TO THOSE PERSONS. IF THEY ARE THE ADVANCES FROM SHRI JALK OTE TO THESE PERSONS, THE DEPT. MUST EXPLAIN AS TO WHY ALL SUCH NOTIN GS APPEAR IN THE DIARIES. THERE IS ABSOLUTELY NO REASON AS TO WHY SUCH NOT INGS ARE APPEARING IN THE DIARIES. THE SECOND POINT TO BE NOTE D IS THAT THE TRANSACTIONS WITH SUCH NOTINGS ARE NOT ONLY A FEW BUT M AJORITY OF THE TRANSACTIONS IN THE DIARIES HAVE SUCH NOTINGS AGAINST THE M. HENCE, IF THE DEPTS. CONTENTION IS ACCEPTED, ONE FAILS TO UNDERSTAND THE SIGNIFICANCE OF SUCH NOTINGS IN THE DIARIES. SOME OF THE IMPORTANT NOT INGS IN THE DIARIES WHICH AMPLY CLARIFY THAT THESE ARE NOT ADVANCES BY SH RI JALKOTE TO THEM ARE GIVEN IN COLOURED INKS IN THE PAPER BOOK NO.3 I. E. THE DIARIES. ONLY A FEW OF THESE AS SAMPLE ENTRIES ARE ANALYSED HEREUNDER: I. PAGE 815 ACCOUNT OF GANGADHAR MAHAJAN, CONTRACT OR AT NANDED - IN THIS ACCOUNT, SHRI PATIL, SHRI ANDURE AND SHRI MAHAJ AN HAVE ALL SIGNED. IF THIS IS AN ACCOUNT OF ADVANCES MADE BY THE ASSESSEE TO SH RI GANGADHAR MAHAJAN, THERE IS NO EXPLANATION OF THE DEPT. AS TO W HY SHRI ANDURE AND SHRI PATIL HAVE ALSO SIGNED THEREIN. THIS ITSELF INDICA TES THAT THESE TRANSACTIONS ARE BETWEEN THE ABOVE MENTIONED THREE PE RSONS AND NOT WITH THE ASSESSEE. II. PAGE 817 - THIS IS AN ACCOUNT OF SHRI ANDURE IN W HICH THERE IS A REDUCTION OF RS. 3.55 FOR THE CAR. THERE IS NO CAR PU RCHASED BY THE ASSESSEE FROM SHRI ANDURE AND THEREFORE, IF THERE IS A REDUCTION FROM THE TOTAL IN THAT ACCOUNT, THE DEPT MUST EXPLAIN THE TRANSACTION. SIMILARLY, IF THIS IS AN ACCOUNT OF ADVANCES BY THE ASSE SSEE TO SHRI ANDURE, WHY DO THE NAMES OF AKRAM, BORWAL WHO ARE FA BRICATOR AND SUPERVISOR FIGURE IN THIS ACCOUNT. THERE IS NO EXPLANAT ION BY THE DEPT. IN THIS REGARD. III. PAGE 819 - THIS IS THE ACCOUNT OF SHRI M. B. PATIL IN WHICH THE NAMES OF HIS SERVANT, SHRI SHANKAR, HIS BROTHER SHRI B HIMRAO AND THE NAME OF THE CONTRACT SITE - FULAMBARI RAJUR ARE MENT IONED AGAINST CERTAIN FIGURES. AGAIN, IF THE DEPT CONTENTION IS THA T THIS IS AN ACCOUNT OF THE ADVANCES MADE BY THE ASSESSEE TO SHRI PATIL, IT MUST EXPLAIN AS TO WHY THE ABOVE NAMES FIGURE AGAINST CERTAIN SUMS WHICH A RE ADDED AND SUBTRACTED. THERE IS NO EXPLANATION BY THE DEPT. IV. PAGE 825 - IS THE ACCOUNT OF SHRI M. B. PATIL I N WHICH THE NAME OF SHRI PATHALE, SHRI BENDRE, SHRI D. R. DESHMUKH, SUBCO NTRACTORS FIGURE AND ALSO THE NAME OF THE VARIOUS SITES LIKE NASHIK NIRM AL ROAD, FULAMBARI TALEGAON RAJUR, ETC. ARE MENTIONED AGAINST CERTAIN FIGURES. 41 THERE IS NO CONNECTION OF THE ASSESSEE WITH THESE NAMES AN D HENCE, THIS CANNOT BE TAKEN AS ADVANCES BY THE ASSESSEE TO SHRI PATIL . V. PAGE 826 - IS AGAIN A PAGE ON WHICH THE NAMES OF VARIOUS SITES ARE WRITTEN AND ADDED TO THE FIGURES. WE DO NOT UNDERSTAN D AS TO HOW THIS ACCOUNT CAN BE TREATED AS ADVANCES GIVEN BY SHRI. JAL KOTE TO SHRI. M. B. PATIL WHEN THE ADDITIONS ARE CLEARLY ON ACCOUNT OF T HE VARIOUS SITES. V. PAGE 830 - IS AGAIN A PAGE WHEREIN THE NAMES OF VARIOUS CONTRACT SITES ARE MENTIONED ALONG WITH THE NAMES OF THE SUB CON TRACTORS AND HENCE, THIS PAGE CANNOT BE CONSIDERED TO BE THE ADVAN CES GIVEN BY THE ASSESSEE TO SHRI M. B. PATIL. VI. PAGE 831 - IS AN ACCOUNT OF SHRI ANDURE IN WHIC H IT IS CLEARLY WRITTEN THAT HE HAS TO RECEIVE RS. 1,55,700/- FROM SH RI GANGADHAR MAHAJAN AND AGAIN THE NAMES OF VARIOUS SITES, PURCHASES OF LANDS, ETC. ETC. ARE MENTIONED. THE ASSESSEE HAS NO CONNECTION WITH THESE TRANSACTIONS AND HENCE, THE ACCOUNT CANNOT BE CONSIDER ED TO BE ADVANCES MADE BY THE ASSESSEE TO SHRI ANDURE. IN THIS AC COUNT, SHRI ANDURE HAS SIGNED ON THE REDUCTION OF RS. 7.61/- FROM THE TOTAL. ON THE LEFT SIDE OF THE PAGE IS THE ACCOUNT OF SHRI M. B. PA TIL WHEREIN THE NAMES OF VARIOUS SITES ARE MENTIONED. VII. PAGE 836 - IS AGAIN A PAGE WHEREIN THE NAMES OF VARIOUS CONTRACT SITES AND SUB CONTRACTORS ARE MENTIONED. IN TH IS ACCOUNT THE NAMES OF SHRI PRASHANT MAHAJAN, SHRI ANDURE FIGURE IN THE ACCOUNT OF SHRI M. B. PATIL. THIS ITSELF SHOWS THAT THESE ARE THE TRANSACTIONS PERTAINING TO VARIOUS SITES AND THESE PERSONS AND THEY CA NNOT BE CONSIDERED AS ADVANCES BY THE ASSESSEE TO SHRI M. B. PATI L. VIII. PAGE 837 - STARTS WITH THE BRACKETED PORTION OF 4 + 1 = 5C. BEFORE THAT 4C FIGURES ON PAGE 831. IF THE ACCOUNT M EANS THE ADVANCES GIVEN BY THE ASSESSEE TO SHRI M. B. PATIL, THE PAGES IN BETWEEN DO NOT INDICATE THE TRANSACTIONS AMOUNTING TO RS. 1 CR. WHICH IS THE ADDITION FROM 831 TO 836. SIMILARLY, ON THIS PAGE, THERE ARE NAMES OF VARIOUS CONTRACT SITES AND SUBCONTRACTORS AGAINST WHICH THE AMO UNTS ARE ADDED. THUS, IF THIS ACCOUNT IMPLIES THAT THE ASSESSEE HAS ADVANCED THE FUNDS TO SHRI M. B. PATIL, THERE IS NO REASON FOR ALL THESE NAMES FIGURING IN THE ACCOUNT. THERE ARE NUMBER OF SUCH ENTRIES WHICH CAN BE DEMONSTR ATED FROM THE DIARIES TO SHOW THAT THE TRANSACTIONS IN THE DIARIES DO NOT REPRESENT THE ADVANCES ALLEGEDLY GIVEN BY SHRI JALKOTE TO OTHERS. H ENCE, THIS CONTENTION OF THE DEPT. THAT THE DIARIES REPRESENT T HE ADVANCES GIVEN BY SHRI JALKOTE TO VARIOUS PERSONS HAS TO BE REJECTED. A. IT IS A SETTLED POSITION OF LAW ACCEPTED IN MANY C ASES THAT A DOCUMENT, A DIARY ETC. FOUND IN THE SEARCH IS PRESUMED TO BE TRUE AND GENUINE, BUT THE BURDEN IS ON THE DEPARTMENT TO PROV E THAT THE ENTRIES THEREIN REVEAL THE MEANING WHICH THE A.O. IS GIVING TO THESE ENTRIES. IN THIS CASE, THE VARIOUS EXAMPLES MENTIONED HERE UNDER CL EARLY ESTABLISH THAT THE DEPARTMENT HAS NOT DISCHARGED THIS BURDEN. RE LIANCE CAN BE PLACED IN SUPPORT OF THIS PROPOSITION ON 67 TTJ 247 AN D 39 ITD 183, 193, 73 ITD 379. B. PAGES NO.815, 817, 819, 820 AND VARIOUS OTHER PAG ES MENTION THE NAMES OF THIRD PARTIES AGAINST THE VARIOUS SUMS WHICH ARE ADDED OR REDUCED IN THE ACCOUNTS OF SHRI ANDURE, MAHAJAN, PAT IL, ETC. IF ACCORDING TO THE DEPT, THESE ENTRIES REFLECT THE FACT THAT SHRI JALKOTE HAS GIVEN THE 42 FUNDS TO THEM, THE BURDEN IS ON THE DEPT. TO SHOW AS TO HOW THE NARRATIONS IN THE DIARIES GIVE SUCH A MEANING. IF THE CONCERNED FIGURES ARE CONSIDERED ALONGWITH THE NARRATIONS MENTIONED AGA INST, THEY CANNOT BE INTERPRETED AS LOANS GIVEN BY THE ASSESSEE TO VARIOUS P ERSONS. C. ON A NUMBER OF PAGES LIKE 825,826,827,829,830,83 6 AND MANY MORE PAGES, THE NAMES OF VARIOUS CONTRACT SITES ARE MENT IONED. THE DEPT. MUST SHOW AS TO WHAT THESE NAMES REVEAL IF THE CON CERNED ENTRIES ARE CONSIDERED BY THEM AS ADVANCES BY SHRI JALKOTE TO THESE VARIOUS PERSONS. IF THE CONCERNED FIGURES ARE CONSIDERED ALONGW ITH THE NARRATIONS MENTIONED AGAINST, THEY CANNOT BE INTERPRE TED AS LOANS GIVEN BY THE ASSESSEE TO VARIOUS PERSONS. D. THE DEPT. HAS ACCEPTED THAT ALL THESE ARE RUNNING ACCOUNTS AND HENCE, THE FIGURES WRITTEN AGAINST VARIOUS SITES, PERSONS ARE ALSO TAKEN AS SUMS ADVANCED BY SHRI JALKOTE TO THESE PERSONS. ACCORD INGLY, WHEN THE NARRATIONS IN THE DIARIES DO NOT GIVE THE MEANING THAT THESE ARE ADVANCES BY SHRI JALKOTE TO THESE PERSONS, THE DEPT. IS NOT JUSTIFIED IN DRAWING SUCH CONCLUSION THAT THE ULTIMATE FIGURES REP RESENT THE ADVANCES EVEN THOUGH, THE COMPONENTS OF THE ACCOUNTS A RE NOT ADVANCES. E. ON A NUMBER OF PAGES THE NAMES OF SUB-CONTRACTORS, SERVANTS, FAMILY MEMBERS OF SHRI PATIL, ANDURE OR MAHAJAN ARE NOTED, THE DEPT. HAS NOT SHOWN AS TO HOW AND WHY THESE ENTRIES ARE CONSI DERED AS ADVANCES BY SHRI JALKOTE TO THESE PERSONS, [PAGE NOS. 81 7,820,821,840, ETC.] F. ON PAGE NO 815, IS THE ACCOUNT OF SHRI GANGADHAR MAHAJAN AND WHICH IS SIGNED BY HIM AS WELL AS SHRI M B PATIL, SHRI ANDURE AND MENTIONS ON CERTAIN TRANSACTIONS THE NAME OF SHRI PATI L AND SHRI ANDURE. IT IS NOT KNOWN AS TO HOW THIS PAGE CAN BE TR EATED AS INDICATING FUNDS ADVANCED BY SHRI JALKOTE TO SHRI GA NGADHAR MAHAJAN. G. ON NO PAGE, THERE IS A JOTTING TO THE EFFECT THA T SHRI JALKOTE HAS ADVANCED THE FUNDS TO ANY OF THESE PERSONS. ACCORDINGL Y, NO INTERPRETATION OF THE TRANSACTIONS CAN BE POSSIBLE TO T HE EFFECT THAT THESE SUMS REPRESENT ADVANCES BY SHRI JALKOTE TO THESE PERSONS. H. THE DEPT'S THEORY IS THAT THESE PERSONS HAVE SIGNED O N VARIOUS ENTRIES WHICH ARE ADDED WHICH INDICATE THEIR CONFIRM ATION OF HAVING ACCEPTED THE FUNDS FROM SHRI JALKOTE. THUS, IN THE AC COUNTS, WHENEVER THERE WAS A REDUCTION FROM THE TOTAL, SHRI JALKOTE SH OULD HAVE SIGNED IF THE DEPARTMENTS' THEORY IS ACCEPTED. ON VARIOUS PAGES ( 817, 818, 827, 831, 852, 849, 850, ETC) IT IS NOTICED THAT THESE PER SONS HAVE SIGNED ON THE ENTRIES WHICH ARE REDUCED ALSO FROM THE TOTAL. IF THE REDUCTION IMPLIED THAT THESE PERSONS HAVE REPAID TO SHRI JALKOT E, IT WAS ESSENTIAL FOR SHRI JALKOTE TO SIGN ON THESE ENTRIES. THIS IS NOT THE CASE AS PER THE DIARY NOTINGS. I. ON A FEW PAPERS, IN THE ACCOUNTS OF THESE PERSONS, CERTAIN AMOUNTS ARE MENTIONED AGAINST THE NAME OF MRS. JALKOTE OR A FEW OF THEIR EXPENSES ARE ALSO MENTIONED. IT IS BUT NATURAL TH AT THESE PERSONS BEING VERY CLOSELY RELATED TO SHRI JALKOTE MIGHT HAV E GIVEN A FEW GIFTS TO THEM OR SOMETIMES, WHEN MR. JALKOTE WAS NOT AVAILABLE IN AURANGABAD, FOR CERTAIN URGENT NEEDS, THESE PERSONS MIGHT HAVE MADE PAYMENTS TO HIS FAMILY MEMBERS. BUT SUCH SMALL AND A FEW ENTRIES DO NOT RESULT IN THE CONCLUSION THAT ALL THESE FIGURES IN THE DIARIES RE FLECT ADVANCES BY SHRI JALKOTE TO THESE PERSONS. 43 J. IN THE ACCOUNT OF ONE PERSON, SOMETIMES, THE NAMES OF OTHER PERSONS ALSO APPEAR. FOR EX.: IN THE ACCOUNT OF SHRI ANDURE ON PAGE NO.818, THERE IS AN ENTRY IN THE NAME OF PATIL ON 12.10, THA T MEANS THIS IS NOT THE AMOUNT RECEIVED BY HIM FROM SHRI JALKOTE. SIMILAR N OTINGS WOULD BE FOUND ON VARIOUS PAGES (820,821,831,837 828 ETC.). IF THESE ENTRIES REFLECTED ADVANCES BY SHRI JALKOTE TO THE ACCOUNT HO LDERS, THE DEPARTMENT HAS NOT GIVEN ANY EXPLANATION AS TO WHY TH ESE NAMES APPEAR IN THEIR ACCOUNTS. K. THE DIARIES ARE IN CODED FIGURES AND WORDS. BECAUS E OF THE CLARIFICATION GIVEN BY THE ASSESSEE IN THE STATEMENTS, TH E DEPARTMENT IS TREATING THESE FIGURES IN LACS OR IN CRORES. OTHERWISE, THE DEPARTMENT HAD NOT FOUND ANY EVIDENCE DURING THE SEARCH TO INDI CATE THE EXACT QUANTUM REFLECTED BY THE FIGURES IN THE DIARIES. HENC E THE BASIS OF ADDITION IS THE STATEMENT OF THE ASSESSEE. IF THAT IS SO, THE ASSESSEE'S OTHER VERSION THAT THESE FIGURES ARE NOT HIS FUNDS SHOUL D ALSO BE ACCEPTED. RELIANCE CAN BE PLACED ON THE DECISION IN 71ITD 245, 56 TTJ 460 THAT A STATEMENT SHOULD BE ACCEPTED IN TOTAL AND NOT IN PARTS. THUS, IF IN THE SAME STATEMENT, THE ASSESSEE HAS CONSISTENTLY STAT ED THAT THESE DIARIES DO NOT REPRESENT ANY SUCH ADVANCES GIVEN BY HIM TO VARIOUS PERSONS, HIS STATEMENT TO THAT EFFECT SHOULD ALSO BE ACCE PTED. L. THE VARIOUS ACCOUNTS REFLECT USER OF FUNDS BY THE PERSONS CONCERNED FOR PURCHASE OF PROPERTIES LIKE : MITMITA LAND, PADEGAON LAND, SHOPS AT APNA BAZAR, MUMBAI FLAT ETC. (PAGE NO .818 FOR SHOPS AT APNA BAZAR, PAGE NO.854- PADEGAON FARM EXPENSES, MITM ITA LAND PAGE NO.855 & 853, PAGE NO. 829 OSMANPURA HOUSE, MITMITA L AND, PADEGAON EXPS, PAGE NO.838, MUMBAI FLAT,RENUKA PROPERTY) CAN BE REFERRED TO. NOW THESE PROPERTIES ARE ACQUIRED, OWNED AND POSSESSED LE GALLY AND PHYSICALLY BY THOSE RESPECTIVE PERSONS. THEIR TITLE DEE DS WERE NOT FOUND WITH SHRI JALKOTE. THOSE PERSONS HAVE ADMITTED THE OWN ERSHIP OVER THOSE PROPERTIES. AS THEY HAVE MADE THE PAYMENTS, THE REDUCTION IN THEIR ACCOUNTS IS MADE. IF THAT BE SO, THERE IS NO REASO N TO TREAT THESE PROPERTIES AS ACQUIRED FROM THE FUNDS OF THE ASSESSEE OR THEY ARE HIS BENAMI PROPERTIES. THE DEPARTMENT HAS NOT DISCHARGED THE ONUS TO PROVE THAT THESE PROPERTIES ARE THE BENAMI PROPERTIES OF THE ASSESSEE. M. THE DIARIES DO NOT ALSO REFLECT ANY INTEREST BEING CHARGED BY SHRI JALKOTE TO THESE PERSONS. PARTICULARLY, SHRI M. B. PA TIL IS A BIG CONTRACTOR AND AS CONTENDED BY THE A.O., IF THE ASSESSEE HAS ADVANC ED A SUM OF RS. 9.82 CRS. TO HIM, HE WOULD HAVE DEFINITELY CHARGED I NTEREST TO SHRI PATIL WHICH IS NOT THE CASE. FOR THAT MATTER, THERE IS NO EN TRY OF INTEREST IN THE DIARIES IN ANY OF THE ACCOUNTS. N. IN FACT, IN PARA 3.100 ON PAGE 57 OF CIT[A) ORD ER, HE REFERS TO THE APPRAISAL REPORT PREPARED BY THE DI WING IN WHICH TH E INFERENCE IS DRAWN BY THEM THAT THE DIARIES REFLECT THE UNDISCLOSED INCOME OF SHRI PATIL AND OTHERS. BUT THERE IS NO FINDING BY THEM THA T THE DIARIES REFLECT ADVANCES BY SHRI. JALKOTE TO THESE PERSONS. IT IS TO BE NOTED THAT EVEN AFTER SEARCH, THE DI WING CONDUCTED VARIOUS ENQUIRIES, THEY WENT ON QUESTIONING THE ASSESSEE (STATEMENT U/S 131 BEING RECORDE D FROM 13.12.2001 TO 18.1.2002) (PAGE NO. 724 -783) AND AFTER SUCH DETAILED ENQUIRY, THEY HAVE GIVEN THE ABOVE FINDING. - O. THE A.O. HAS HELD THAT THE SIGNATURES APPEARING IN THE DIARIES OF VARIOUS PERSONS AMOUNT TO THEIR ACCEPTANCE OF THE LOAN S FROM THE ASSESSEE. THIS IS A VERY WILD PRESUMPTION. BECAUSE ON THE B ASIS OF THE DIARIES, IF THE ASSESSEE HAD GONE TO COURT FOR RECOVERY OF THE FUNDS FROM THESE PERSONS, THERE WAS NO CHANCE OF THE COURT ACCEPTI NG THE ASSESSEE 1 S DIARY NOTINGS AS PROOF FOR THE AMOUNTS GIVEN TO THESE PERSONS. IN 44 CONTRACT ACT, SUCH NOTINGS WOULD NOT HAVE AMOUNTED TO THE AGREEMENTS BETWEEN THE ASSESSEE AND THE VARIOUS PERSONS. RELIANCE CAN BE PLACED ON SECTION 29 OF THE CONTRACT ACT. THUS, THE MERE SIGN ATURES OF THESE PERSONS IN THE DIARIES CANNOT AMOUNT TO THEIR ACCEPTAN CE OF THE FUNDS FROM THE ASSESSEE. P. AS ALREADY CLARIFIED EARLIER, THE DEPT. HAS NOT FOUND ANY SECURITY, ASSET OR GUARANTEE FROM ANY OF THESE PERSONS WITH THE A SSESSEE DURING THE SEARCH. IF THE ASSESSEE HAD ADVANCED SUCH LARGE FUNDS TO THESE PERSONS, HE WOULD HAVE ENSURED THAT THE PROPER GUARANT EE OR A SECURITY IS TAKEN BY HIM. NOT ONLY THAT, EVEN THE TITLE DEEDS OF VARIOUS PROPERTIES WERE ALSO NOT FOUND WITH THE ASSESSEE. THESE ASSETS WERE IN THE ENJOYMENT OF THE RESPECTIVE PERSONS. THUS, THE BASIC TES TS OF BENAMI TRANSACTIONS ARE ALSO NOT FULFILLED IN THIS CASE. THESE T ESTS ARE GIVEN IN DETAILS IN 242 ITR 133,112 ITR 413 OR 134ITR364. Q. WE HAVE ALSO CLARIFIED THAT DURING THE SEARCHES A T THE PREMISES OF SHRI ANDURE, SHRI MAHAJAN OR SHRI PATIL, ALSO THERE WAS NO EVIDENCE FOUND TO SHOW THAT THEY HAD TAKEN LOANS / FUNDS FROM T HE ASSESSEE OR NO SUCH SECURITY OR GUARANTEE WAS FOUND WITH ANY ONE OF T HEM. R. IN THE PAPER BOOK, WE HAVE GIVEN THE VARIOUS DOC UMENTS IN RELATION TO THE PROPERTIES LIKE MITMITA LAND, APNA B AZAR SHOPS, RENUKA PROPERTY, ETC. ETC. WHICH CLARIFY THAT ALL THESE PRO PERTIES WERE PURCHASED BY VARIOUS PERSONS AND NOT BY THE ASSESSEE AND IT IS ALSO TO BE NOTED THAT THE A.O. HAS TAXED THE RENTAL INCOME F ROM APNA BAZAR SHOPS, RENUKA BUNGALOW SUBSTANTIVELY IN THE HANDS OF SH RI ANDURE AND SHRI MAHAJAN (THEIR RESPECTIVE BLOCK ASST. ORDERS) BUT HE HAS TAXED THE INVESTMENT IN THE HANDS OF THE ASSESSEE. IF THE ASSESSEE IS TH E REAL OWNER OF THESE PROPERTIES, HE SHOULD HAVE TAXED THE RE NTAL IN THE HANDS OF THE ASSESSEE. THUS, HIS OWN DECISION CLARIFIES THAT HE H AS ACCEPTED THAT THE OWNERS OF THESE SHOPS ARE SHRI ANDURE AND SHRI MAHAJAN AND NOT THE ASSESSEE. S. IN THE CASE OF SHRI M. B. PATIL GROUP, THEY HAVE GONE TO THE SETTLEMENT COMMISSION AND THEIR PETITIONS ARE ADMITTED U/S.245D(L). THE ORDER OF THE SETTLEMENT COMMISSION IS GIVEN ON PAG E 389 OF THE P.B. I. FROM THIS ORDER, IT IS NOTICED THAT THE DEP T. HAS NOT RAISED ANY CONTENTION BEFORE S. C. THAT THE AMOUNTS INVOLVED I N THE DIARIES PERTAINED TO THE ADVANCES GIVEN BY SHRI JALKOTE TO S HRI M.B. PATIL. ON THE OTHER HAND, THE CONTENTION HAS BEEN THAT THE DI ARIES REFLECT THE INCOME OF RS. 9.41 CRS. OF SHRI M. B. PATIL AND HE SHO ULD BE ASSESSED ON THAT INCOME. SETTLEMENT COMMISSION HAS ADMITTED THE P ETITION IMPLYING THEREBY THAT THEY WOULD COMPUTE THE INCOME OF SHRI M. B. PATIL ON THE BASIS OF THE DIARY NOTINGS. IN THE ORDER, IT REFERS TO THE DIARIES SEIZED FROM SHRI JALKOTE. THE ASSESSEE RELIES ON T HE DECISION OF SETTLEMENT COMMISSION WHEREIN THE APPRAISAL REPORT IS ALSO REFERRED TO AND AS PER THAT ORDER, IT IS CLEAR THAT THE APPRAISAL REPORT ALSO MENTIONS THE ENTRIES IN THE DIARIES PERTAINED TO SHRI M. B. P ATIL. ACCORDINGLY, THE FINDING IN THE APPRAISAL REPORT ALSO GOES IN FAVOUR O F THE ASSESSEE. THUS, WHEN SETTLEMENT COMMISSION HAS HELD THAT THE DIAR IES CONTAIN THE CONTRACT RECEIPTS OF SHRI M.B. PATIL, THIS VIEW SH OULD BE FOLLOWED EVEN IN THE PRESENT CASE IN VIEW OF THE DECISION OF I TAT IN THE CASE OF KINETIC HONDA [77 ITD 393], 79 ITD 84] AND SUPREME COURT DECISION IN [282 ITR 435]. 45 9. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY THE LD. CIT DEPARTMENTAL REPRESENTATIVE ARE CONCERNED HE SUBMIT TED THAT ALL THOSE DECISIONS ARE ON THE ISSUE THAT THE INCOME SHOULD B E TAXED IN THE HANDS OF THE RIGHT PERSON. HE SUBMITTED THAT THERE IS NO DISPUTE IN RESPECT OF THE SAID LEGAL PROPOSITION. HOWEVER, THE ISSUE INV OLVED IN THE CASE OF THE ASSESSEE IS TOTALLY DIFFERENT FROM THE ABOVE IS SUE AND THEREFORE THE VARIOUS CASE DECISIONS RELIED ON BY THE LD. CIT DEP ARTMENTAL REPRESENTATIVE ARE NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. HE AGAIN REITERATED THAT THE HONBLE SETTLEMENT COMMIS SIONER HAS GIVEN A FACTUAL FINDING THAT THE ENTRIES IN THE SEIZED DIAR IES BELONG TO THE OTHER PERSONS AND NOT TO THE ASSESSEE. SINCE AS PER THE EARLIER DECISION CITED BY HIM TO THE PROPOSITION THAT THE FACTUAL POSITION ACCEPTED BY ONE AUTHORITY SHOULD BE FOLLOWED BY OTHER AUTHORITIES A LSO, THEREFORE, IN ABSENCE OF ANY CONTRARY DECISION BROUGHT TO THE NO TICE OF THE BENCH AGAINST THE ABOVE LEGAL PROPOSITION, THERE IS NO RE ASON TO DEPART FROM THE FACTUAL FINDING GIVEN BY THE HONBLE SETTLEMENT COMMISSION. HE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY TH E REVENUE SHOULD BE DISMISSED. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREM ISES OF THE ASSESSEE 3 DIARIES IDENTIFIED AS A-67, A-68 AND A-71 WERE FOUN D AND SEIZED FROM THE POSSESSION OF THE ASSESSEE. THERE IS ALSO NO DI SPUTE TO THE FACT THAT ALL THESE DIARIES WERE WRITTEN BY THE ASSESSEE HIMS ELF AND THESE INCLUDE 46 ENTRIES RELATING TO VARIOUS TRANSACTIONS PERTAINING TO MR. M.B. PATIL, MR. M.H. ANDURE, MR.P.B. MAHAJAN AND VARIOUS OTHER PERS ONS. ACCORDING TO THE REVENUE THE DIARIES CONTAIN THE VARIOUS TRAN SACTIONS OF THE ASSESSEE WITH HIS CLOSE FRIENDS AND RELATIVES IN A METICULOUS MANNER AND THESE ARE THE UNACCOUNTED INVESTMENTS/ADVANCES GIVE N BY THE ASSESSEE FROM TIME TO TIME TO HIS FRIENDS AND RELATIVES. IT IS THE CASE OF THE ASSESSEE THAT AT THE INSTRUCTIONS OF HIS RELATIVES THE ASSESSEE WAS MAINTAINING THE ACCOUNTS FOR THEM AND THESE ARE NOT HIS ADVANCES/INVESTMENTS. 10.1 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSE SSEE IN THE PAPER BOOK AS WELL AS THE OBSERVATIONS OF THE AO AS WELL AS THE CIT(A) WE FIND THESE DIARIES WERE WRITTEN FOR THE PERIOD FROM MAY 1998 TO NOVEMBER 2001 AND THESE ARE NOT WRITTEN EVERY DAY B UT AFTER A GAP OF 15 TO 30 DAYS APPROXIMATELY. THESE DIARIES ARE COM MON AND MENTIONS THE NAMES OF SHRI M.H. ANDURE, SHRI P.B. MAHAJAN, SHRI M.B. PATIL AND A FEW OTHER PERSONS. WE FIND DURING THE COURSE OF SEARCH THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S.132(4) W HEREIN HE HAS CATEGORICALLY STATED THAT ALL THESE TRANSACTIONS AR E PERTAINING TO SHRI M.H. ANDURE, SHRI MAHAJAN, SHRI PATIL ETC. AND HE H AS WRITTEN THE DIARIES AT THE REQUEST OF HIS FATHER-IN-LAW SHRI B. B. MAHAJAN AND THAT THE HAND WRITING WAS THAT OF THE ASSESSEE HIMSELF. IN THE SAID STATEMENT IN HIS ANSWER TO QUESTION NO.6 AND 8 THE ASSESSEE HAD STATED THAT HE HAS NOT GIVEN OR TAKEN ANY LOAN FROM SHRI M.B. PATIL. WE FIND SIMULTANEOUS SEARCHES WERE TAKEN PLACE AT THE RESIDENTIAL PREMIS ES OF THE CLOSE RELATIVES/FRIENDS OF THE ASSESSEE WHOSE NAMES ARE A PPEARING IN THE SEIZED DIARIES. THEIR STATEMENTS WERE ALSO RECORDE D U/S.132(4) EXCEPT IN 47 THE CASE OF SHRI M.B. PATIL WHOSE STATEMENT WAS REC ORDED U/S.131 OF THE I.T. ACT BETWEEN 13-12-2001 TO 18-01-2002. 10.2 WE FIND SHRI P.B. MAHAJAN IN HIS STATEMENT REC ORDED U/S.132(4) HAS CLARIFIED THAT HE HAS NO FINANCIAL OR BUSINESS RELATIONSHIP WITH SHRI JALKOTE BUT HE HAS TRANSACTIONS WITH SHRI M.H. ANDU RE. ALTHOUGH INITIALLY IN HIS REPLY TO QUESTION NO.21 HE HAD STA TED THAT HE HAS TAKEN LOAN OF RS.64 LAKHS FROM SHRI JALKOTE, HOWEVER, IN THE SAID STATEMENT VIDE ANSWER TO QUESTION NO. 41 HE HAS ADMITTED THAT THE EARLIER ANSWER THAT HE HAS TAKEN LOAN FROM SHRI JALKOTE IS WRONG A ND ALL THE MONEY IS HIS OWN AND ACCORDINGLY HE HAD DECALRED THE ADDITIO NAL INCOME OF RS.64 LAKHS. FROM THE ABOVE, WE FIND SHRI P.B. MAHAJAN, ALTHOUGH HAD GIVEN CONTRADICTORY REPLY IN THE EARLIER PART OF THE STAT EMENT HAS SUBSEQUENTLY CORRECTED HIMSELF IN THE SAID STATEMENT AND HAS STA TED THAT HE HAS NOT TAKEN ANY FUNDS FROM SHRI JALKOTE. 10.3 WE FIND SHRI M.H. ANDURE IN HIS STATEMENT RECO RDED U/S.132(4) IN HIS REPLY TO QUESTION NO. 31 HAS STATED THAT HE HAS ONLY ONE FINANCIAL TRANSACTION WITH SHRI JALKOTE AND THAT IS THE SALE OF HIS HOUSE AT OSMANPURA. NOWHERE IN THE STATEMENT HE HAS ADMITTE D THAT HE HAD TAKEN ANY FUNDS FROM SHRI JALKOTE. ALTHOUGH SHRI M .B. PATIL WAS NOT ASKED ANY QUESTION U/S.132(4) ABOUT THE ENTRIES IN THE SEIZED DIARIES WE FIND HIS STATEMENT WAS RECORDED U/S.131 DURING THE PERIOD FROM 13-12- 2001 TO 18-01-2002 WHEREIN HE HAS ACCEPTED THAT THE NAMES OF VARIOUS PERSONS ARE HIS EMPLOYEES/SUB-CONTRACTORS. HE HAS STATED IN HIS REPLY TO QUESTION NO.19 THAT THE FIGURES ARE THE TOTAL CONTR ACT WORKS GIVEN TO SHRI M.H. ANDURE AND SHRI MAHAJAN. SIMILARLY IN AN SWER TO QUESTION NO. 37, HE HAD CATEGORICALLY STATED THAT THE FIGURE S REPRESENT HIS CONTRACT 48 RECEIPT OR MACHINERY HIRE CHARGES. SIMILARLY IN AN SWER TO QUESTION NO.39 HE HAD STATED THAT HIS SUB-CONTRACTORS FIGURE S IN THE DIARIES AND SHRI TUKARAM IS AN EMPLOYEE IN THE OFFICE. THUS, H E HAS NOWHERE STATED THAT HE HAS FINANCIAL TRANSACTION WITH THE ASSESSEE . 10.4 FROM THE ABOVE, WE FIND THAT THE PERSONS WHOSE NAMES ARE APPEARING IN THE SEIZED DIARIES HAVE CATEGORICALLY STATED THAT THEY DO NOT HAVE ANY FINANCIAL TRANSACTIONS (EXCEPT IN THE CASE OF SHRI M.H. ANDURE WHO HAD SOLD HIS HOUSE AT OSMANPURA TO THE ASSESSEE ) WITH THE ASSESSEE. THEY HAVE OWNED UP THE VARIOUS INVESTMENTS STANDING IN THEIR NAMES AND DECLARED THE SAME IN THEIR RETURNS FOR THE BLOC K PERIOD AND PAID TAXES. 10.5 WE FIND SHRI M.B. PATIL FILED A PETITION BEFOR E THE HONBLE SETTLEMENT COMMISSION WHO PASSED THE FINAL ORDER U/ S.245D(4) ON 26- 04-2013 WHEREIN THEY HAVE STATED THAT THE THEORY O F FINANCIAL TRANSACTION BETWEEN PATIL GROUP AND JALKOTE AS PER THE SEIZED DIARIES PROPOUNDED BY THE DEPARTMENT IS TOTALLY UNFOUNDED, UNSUBSTANTIATED AND CANNOT BE ACTED UPON. THE RELEVANT OBSERVATION OF THE HONBLE SETTLEMENT COMMISSION AT PAGE 14 OF THE ORDER READS AS UNDER : WE HAVE CONSIDERED THE ABOVE. THE DEPARTMENT HAS TA KEN DIFFERENT STANDS RELATING TO THESE ENTRIES BEFORE THE CIT(A), ITA T AND NOW BEFORE THE COMMISSION. WE FIND OURSELVES IN AGREEMENT WITH TH E AR THAT THERE IS NO PRESUMPTION THAT THESE ENTRIES BELONGS TO PATIL GR OUP. IN THIS SITUATION, NO INCOME CAN BE ATTRIBUTABLE TO THE APPL ICANT GROUP ON THIS BASIS. IT IS ON THE BASIS OF THE STATEMENT OF SHRI PATIL THAT THE DEPARTMENT IS INSISTING TO TAX THE ENTIRE AMOUNT IN TH E HANDS OF PATIL GROUP. THE STATEMENTS OF SHRI PATIL AND SHRI JALKOTE ARE TO BE CONSIDERED IN THIS RESPECT. IT IS ALSO TO BE BELIEVED T HAT THE ENTIRES DO NOT SHOW THE INCOME OR THE FINANCIAL TRANSACTIONS OF T HE PATIL GROUP BUT THESE ARE PART OF THE EXPENDITURE AND RECEIPTS ONLY. THERE IS EVIDENCE IN THE SEIZED RECORDS TO SHOW THAT THE WORKS AWARDED TO OT HERS HAD BEEN EXECUTED BY THE APPLICANTS AND THE INCOME FROM SUCH A CTIVITIES HAD REMAINED OUTSIDE THE BOOKS OF ACCOUNTS AND BUT FOR THE ACTION U/S.132, IT WOULD HAVE REMAINED UNDISCLOSED. DURING THE COURSE OF HEARING OF THE APPLICATIONS, WE FOUND THAT THE THEORY OF FINANC IAL TRANSACTIONS BETWEEN THE PATIL GROUP AND SHRI JALKOTE AS PER THE SEIZED AFORESAID 49 DIARIES PROPOUNDED BY THE DEPARTMENT IS TOTALLY UNFOU NDED, UNSUBSTANTIATED AND CANNOT BE ACTED UPON. THE SEARCH HAS NOT REVEALED ANY DIRECT CLINCHING CORROBORATIVE AND COGENT EVIDE NCE IN THIS REGARD. 10.6 WE THEREFORE FIND MERIT IN THE SUBMISSION OF T HE LD. COUNSEL FOR THE ASSESSEE THAT THE VIEW TAKEN BY ONE AUTHORITY S HOULD BE FOLLOWED BY OTHER AUTHORITY ALSO AND IT BE HELD THAT ALL THESE ENTRIES IN THE DIARIES DO NOT PERTAIN TO THE ASSESSEE AND THEY ARE PERTAINING TO THE M.B. PATIL GROUP. 10.7 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSE SSEE WE FIND AFTER THE SEARCH THE INCOME TAX DEPARTMENT INFORMED THE A NTI CORRUPTION BUREAU OF MAHARASHTRA ABOUT THE VARIOUS EVIDENCES F OUND RELATING TO SHRI N.H. JALKOTE. THEREAFTER, THE ANTI CORRUPTION BUREAU CONDUCTED DISCRETE ENQUIRIES AT THEIR LEVEL AFTER COLLECTING XEROX COPIES OF THE SEIZED DIARIES, STATEMENT OF THE PERSONS AND THE AP PRAISAL REPORT AND WENT THROUGH ALL THE DOCUMENTS FOUND. THE SUBMISSI ON OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ANTI CORRUPTION BUREAU A FTER CONDUCTING INDEPTH INVESTIGATION HAD CLOSED THE ENQUIRIES AGAI NST SHRI N.H. JALKOTE HOLDING THAT THERE WAS NO CASE OF AMASSING OF UNACC OUNTED WEALTH COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESE NTATIVE. 10.8 WE FURTHER FIND NO STATEMENT U/S.132(4) WAS RE CORDED FROM SHRI M.B. PATIL. IN HIS STEMENT RECORDED U/S.131 SPECIF IC QUESTIONS ABOUT THE SAID DIARIES WERE ASKED TO SHRI M.B. PATIL WHEREIN HE HAD CATEGORICALLY ACCEPTED THE FACT THAT THE SAID DIARIES ALSO INCLUD E TRANSACTIONS PERTAINING TO HIS CONTRACT BUSINESS. HE HAS ALSO A FFIRMED THIS FACT IN THE AFFIDAVIT FILED BY HIM. HOWEVER, WE FIND THE AO HA S NOT EVEN CROSS EXAMINED SHRI M.B. PATIL ON THIS AFFIDAVIT. THEREF ORE, WE FIND MERIT IN 50 THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SHRI MEHTA PARIKH AND CO. REPORTED IN 30 ITR 181 THE AFFIDAVIT OF SH RI M.B. PATIL THAT THE DIARIES REFLECTED THE CONTRACT RECEIPTS SHOULD BE A CCEPTED. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PA PER BOOK WE FIND ALTHOUGH THE VARIOUS PERSONS MENTIONED IN THE SEIZE D DIARIES HAD STATED IN THEIR STATEMENTS RECORDED U/S.132(4) AND U/S.131 OF THE I.T. ACT AND FILED AFFIDAVITS BEFORE THE DY.DIRECTOR OF INCOME T AX (INVESTIGATION), AURANGABAD THAT THE SAID TRANSACTIONS BELONG TO THE M AND THE DIARIES WERE WRITTEN AT THEIR BEHEST BY SHRI N.H, JALKOTE A ND THEY HAVE OFFERED THE INCOME IN THEIR RESPECTIVE HANDS TO TAX, THE AO HAS NOT CONDUCTED ANY FURTHER ENQUIRY TO DISPROVE THE SAME. FROM THE ORDER OF THE CIT(A), WE FIND HE HAS REFERRED TO THE APPRAISAL RE PORT PREPARED BY THE JOINT DIRECTOR OF INCOME TAX (INVESTIGATION), NASHI K WHO HAS CARRIED OUT THE SEARCH AND SEIZURE OPERATIONS AT THE PREMIS ES OF THE ASSESSEE AND IN THE SAID APPRAISAL REPORT DATED 11-02-2002 THE J OINT DIRECTOR OF INCOME TAX (INVESTIGATION), NASHIK, AFTER RECORDING THE STATEMENTS OF THE ASSESSEE AND VARIOUS OTHER PERSONS AND AFTER EX AMINING THE SEIZED DOCUMENTS, AFFIDAVITS OF THE PARTIES AND OTHER RELE VANT INFORMATION HAS GIVEN A FINDING THAT THE TRANSACTIONS APPEARING IN THE DIARIES, A-67 AND A-68 WRITTEN BY SHRI N.H, JALKOTE BE CONSIDERED AS BELONGING TO SHRI M.B. PATIL AND HIS ASSOCIATES, SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN FOR THE PURPOSE OF DETERMINING THE UNDISCLOSED INCO ME IN THEIR RESPECTIVE HANDS. NO FURTHER ENQUIRIES WERE CONDUC TED BY THE ASSESSING OFFICER TO PROVE THAT ALL THE TRANSACTION S, IN FACT, BELONG TO THE ASSESSEE ONLY AND THAT THESE ARE HIS UNDISCLOSED 51 INCOME/INVESTMENTS/ADVANCES. NOTHING MORE HAS BEEN BROUGHT ON RECORD BY THE AO TO COUNTER THE ABOVE FINDING GIVEN BY THE INVESTIGATION WING IN THE APPRAISAL REPORT. FROM T HE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK AND ON PERUSAL OF THE ORDERS OF THE AO AND THE CIT(A) WE FIND MR.M.H. ANDURE, MR . B.B. MAHAJAN AND MR. P.B. MAHAJAN HAVE NOT ONLY ADMITTED THE TRA NSACTIONS APPEARING IN THE SEIZED DIAREIS AS THEIR OWN BUT HA VE ALSO OFFERED TO TAX AS THEIR UNDISCLOSED INCOME APPEARING IN THE SAID D IARIES. THE AO HAS ASSESSED PART OF THE UNDISCLOSED INCOME DECLARED BY THESE PARTIES ON PROTECTIVE BASIS IN THEIR RESPECTIVE HANDS AND TAXE D THE SAME IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. 10.9 SO FAR AS THE VARIOUS INVESTMENTS POINTED BY T HE AO IN THE NAMES OF THE CLOSE RELATIVES OF THE ASSESSEE, WE FIND THE TRANSACTIONS RELATING TO IMMOVABLE PROPERTIES ARE THROUGH REGISTERED DOCUMEN TS STANDING IN THE NAME OF DIFFERENT PERSONS. THE MUNICIPAL TAXES ARE BEING PAID BY THE RESPECTIVE INDIVIDUALS IN THEIR OWN NAME. THE RENT AL INCOME HAS BEEN SHOWN IN THEIR INDIVIDUAL HANDS AND THEY ARE ASSESS ED SEPARATELY ON SUCH RENTAL INCOME ON SUBSTANTIVE BASIS. NOTHING H AS BEEN BROUGHT ON RECORD BY THE AO THAT THOSE PERSONS ARE THE BENAMID ARS OF THE ASSESSEE. THEREFORE, WE AGREE WITH THE FINDING OF THE LD.CIT( A) THAT THERE IS NO GROUND FOR CONSIDERING THE INVESTMENTS STANDING IN THE NAMES OF DIFFERENT PERSONS APPEARING IN THE RUNNING ACCOUNT AS UNDISCLOSED INVESTMENT IN THE HANDS OF THE ASSESSEE. THE VARIO US DECISIONS RELIED ON BY LD.CIT DEPARTMENTAL REPRESENTATIVE ARE DISTINGUI SHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN AL L THE CASES RELIED ON BY LD.CIT DEPARTMENTAL REPRESENTATIVE, WE FIND THE PRO POSITION IS THAT 52 INCOME SHOULD BE TAXED IN THE HANDS OF THE RIGHT PE RSONS. IN THE INSTANT CASE WE FIND THE ASSESSEE HAS DENIED THAT THE TRANS ACTIONS APPEARING IN THE NAME OF DIFFERENT PERSONS IN THE SEIZED DIARIES DO NOT RELATE TO HIM AND HE WAS WRITING THE DIARIES AT THE INSTANCE OF H IS FATHER-IN- LAW/RELATIVES. THE VARIOUS PERSONS, WHOSE NAMES AP PEAR IN THE SEIZED DIARIES HAVE OWNED UP THE TRANSACTIONS APPEARING IN THEIR RESPECTIVE NAMES AND DECLARED IN THEIR RESPECTIVE BLOCK RETURN S. THEREFORE, THERE IS NO DISPUTE REGARDING TAXABILITY OF INCOME IN THE HANDS OF THE RIGHT PERSON. THEREFORE, THE VARIOUS DECISIONS RELIED ON BY THE LD.CIT DEPARTMENTAL REPRESENTATIVE ARE NOT APPLICABLE TO T HE FACTS OF THE PRESENT CASE. IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) DELETING THE ADDITION MADE B Y THE AO WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. GROUND OF APPEAL NO.23 FILED BY THE REVENUE REL ATES TO THE ORDER OF THE CIT(A) IN DELETING THE AMOUNT OF RS.34 .30 LAKHS ON ACCOUNT OF INVESTMENT IN MITMITA LAND. 11.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT REFERENCE TO M ITMITA LAND WAS FOUND AT PAGE 24 AND PAGE 23(OL) OF DIARY A-71 OF T HE ASSESSEE. HOWEVER, IN THE STATEMENT RECORDED U/S.132(4) AS WE LL AS DURING BLOCK ASSESSMENT PROCEEDINGS THE ASSESSEE DENIED TO HAVE MADE ANY INVESTMENT IN MITMITA LAND. THE AO REFERRED TO QUE STION NO.41 PAGE 17, QUESTION NO.44 PAGE 20 AND QUESTION NO.51 PAGE 25 & 26 OF STATEMENT RECORDED U/S.132(4) ON 22-11-2003 AND 23- 11-2001 WHERE SHRI M.H. ANDURE WAS CONFRONTED WITH THE ENTRIES ON PAGE 24 AND 23 53 (OL) OF INVENTORY A-71. ON PAGE 23 (OL) THE AMOUNT OF RS.4.30 LAKHS WAS DEDUCTED FROM THE ACCOUNT OF SHRI M.H. AN DURE WHO STATED THAT THE ENTRY IS ACCEPTABLE TO HIM. IN VIEW OF TH IS SHRI M.H. ANDURE HAD SURRENDERED UNDISCLOSED INCOME OF RS.4,30,000/- IN ANSWER TO QUESTION NO.44. WHEN HE WAS CONFRONTED FURTHER REG ARDING THE CORRECTNESS OF THESE ENTRIES HE SURRENDERED UNDISCL OSED INVESTMENT OF RS.34,29,773/- FOR THE A.Y. 1999-00 INCLUDING RS.4, 30,000/- DECLARED INITIALLY IN ANSWER TO QUESTION NO.44. THE AO ANAL YSED THE ENTRIES ON PAGE 24 OF DIARY A-71 WHICH SHOWED TOTAL COST OF THE LAND AS ON 16-10-98 AT RS.34,29,773/- OUT OF WHICH SHRI N.H.JA LKOTE HAD PAID RS.30 LAKHS AND AGAINST WHICH HE HAD WRITTEN AS SE LF-PAID AGAINST THE ENTRY OF RS.30 LAKHS. 11.2 THE AO OBSERVED THAT THE ENTRY FOR DIFFERENCE OF RS.4,29,773/- OR SAY RS.4.30 LAKHS DATED 16-10-98 WAS MARKED WIT H (**) FOR THE SAKE OF IDENTIFICATION. HE OBSERVED THAT THE SAME MARK OF IDENTIFICATION, I.E. (**) ALSO APPEARS ON PAGE 23 ( OL) ON DIARY A-71 IN RESPECT OF ENTRY OF RS.4.30 LAKHS DEDUCTED FROM THE RUNNING ACCOUNT OF SHRI M.H. ANDURE WITH A NARRATION MITMITA DIFFE RENCE. HE, THEREFORE, WAS OF THE OPINION THAT THE AMOUNT OF RS .30 LAKHS WAS PAID BY THE ASSESSEE SHRI N.H. JALKOTE AND THE REMAINING COST OF RS.4.30 LAKHS WAS ALSO BORNE BY THE ASSESSEE HIMSELF THROUG H THE RUNNING ACCOUNT OF SHRI M.H. ANDURE. HE REJECTED THE EXPLA NATION OF THE ASSESSEE THAT HE HAS NOT INVESTED THE AMOUNT AND TH E SAID WAS INVESTED BY SHRI M.H. ANDURE AND OTHER PERSONS ON T HE GROUND THAT DURING BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI P.B. MAHAJAN HE WAS UNABLE TO EXPLAIN HIS CONTRIBUTION OF RS.22, 07,201/- AND 54 RS.5,07,000/- BY SHRI GOPAL GORTE. THE AO ACCORDIN GLY TAXED THE AMOUNT OF RS.34.30 LAKHS IN THE HANDS OF THE ASSESS EE ON SUBSTANTIVE BASIS. THE AO ALSO ADDED AN AMOUNT OF RS.11,70,000 /- IN THE HANDS OF SHRI P.B. MAHAJAN AND AN AMOUNT OF RS.23,23,000/ - IN THE HANDS OF SHRI M.H. ANDURE ON PROTECTIVE BASIS. 11.3 BEFORE THE CIT(A) THE ASSESSEE MADE ELABORATE ARGUMENTS. IT WAS SUBMITTED THAT NO SUCH INVESTMENT HAS BEEN MADE BY THE ASSESSEE AT ANY TIME DURING THE BLOCK PERIOD. THE SAID PROP ERTY WAS PURCHASED BY HIS RELATIVES NAMELY SHRI M.H. ANDURE AND SHRI P .B. MAHAJAN AND ONE MR. GOPAL GORTE FOR A TOTAL CONSIDERATION OF RS .34,30,000/-. BOTH THE RELATIVES OF THE ASSESSEE HAVE ACCEPTED THIS FA CT AND OFFERED THE INVESTMENTS IN THEIR RESPECTIVE BLOCK RETURNS. THE ASSESSEE HAD ONLY WRITTEN THE FIGURE IN THE DIARY AT THE INSTRUCTION OF HIS RELATIVES. IT WAS ARGUED THAT THE OWNERSHIP OF LAND AND SOURCE OF INC OME OF SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN, THEIR STATEMENT RECOR DED U/S.132(4) AND U/S.131 OF THE I.T. ACT WERE IGNORED BY THE AO. IT WAS SUBMITTED THAT A PORTION OF THE LAND BELONGS TO SHRI P.B. MAH AJAN AND THE SAID LAND WAS TRANSFERRED TO MEGH SEEDS PVT. LTD. IN EXC HANGE OF THE SHARES OF THE SAID COMPANY. THE COMPANY HAS MORTGA GED THE SAID LAND WITH JAMMU &KASHMIR BANK AND OBTAINED LOANS AG AINST THE SECURITY OF THE SAID LAND. THE COMPANY HAS ALSO RE GISTERED CHARGES ON THE LAND BEFORE THE REGISTRAR OF COMPANIES AND HAS MADE PAYMENT OF THE LAND REVENUE TAX ON THE SAID LAND. ALL THESE S HOW THAT THE SAID INVESTMENTS BELONGED TO THE RELATIVES OF THE ASSESS EE SHRI P.B. MAHAJAN AND SHRI M.H. ANDURE. IT WAS ARGUED THAT S HRI M.H. ANDURE HAS ALREADY OFFERED RS.16.30 LAKHS AND SHRI P.B. MAHAJAN 55 RS.11.07 LAKHS TOWARDS THEIR RESPECTIVE SHARES IN M ITMITA LAND. THE BALANCE BELONGS TO MR. GOPAL GORTE WHOSE CONFIRMATI ON WAS ALSO FILED BEFORE THE AO. IT WAS ACCORDINGLY ARGUED THA T NO ADDITION SHOULD BE MADE IN THE HANDS OF THE ASSESSEE. 11.4 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO WH O REITERATED HIS FINDINGS IN THE ASSESSMENT ORDER. AFTER CONFRONTIN G THE SAME TO THE ASSESSEE AND AFTER OBTAINING HIS REJOINDER THE LD.C IT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 5.5 AFTER CONSIDERING THE FACTS OF THE ISSUE INVOLVED, THE ARGUMENTS PUTFORTH BY THE LEARNED AR AND THE REPORTS OF THE A O, I AM INCLINED TO ACCEPT THE ARGUMENTS OF THE LEARNED AR ON ACCOUNT O F FOLLOWING REASONS: I. ALL THE PROPERTY DOCUMENTS I.E. PURCHASE DEED AN D 7/12 EXTRACTS ARE IN THE NAME OF SHRI M.H. ANDURE, SHRI PRASHANT MAHAJAN AND SHRI GOPAL GORTE. XEROX COPIES THE SAID DOCUMENTS WERE PRO DUCED BEFORE THE AO AS WELL AS BEFORE ME AND SAME ARE PLACED ON RECORD. .THIS PROPERTY WAS PURCHASED MUCH BEFORE THE DATE OF SEARCH JOINTL Y IN THE NAME OF THREE PERSONS I.E SHRI M.H. ANDURE, SHRI PRASHANT MAHA JAN AND SHRI GOPAL GORTE. FURTHER SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN HAS ADMITTED DURING THE COURSE OF SEARCH THAT THESE INVE STMENTS HAVE BEEN MADE BY THEM TOWARDS PURCHASE OF MITMITA LAND. THE PR OPERTY CONTINUES TO BE IN THE NAME OF AFORESAID PERSONS AT THE TIME OF SEARCH AND THEREAFTER AND, THEREFORE, SUCH EVIDENCE OF OWNERSHIP NEGATES THE FINDING OF THE AO BASED ON THE ENTRY APPEARING IN T HE DIARY. ONCE IT IS ESTABLISHED THAT THE PROPERTY LEGALLY BELONGED TO T HEM, AS EVIDENT FROM PURCHASE DEED 7/12 EXTRACTS, THEN HOW CAN THE INVESTM ENT BE MADE BY THE APPELLANT UNLESS THESE PERSONS ARE PROVED TO BE 'BENAMIDARS'. II) I HAVE PERUSED THROUGH THE ENTRY OF SUCH INVESTMEN T IN MITMITA LAND AS APPEARING IN THE SAID DIARY A-71 AND DO NOT FIND ANY EVIDENCE TO SHOW THAT THE INVESTMENT IN THE SAID PROPERTY HAS BE EN MADE BY THE APPELLANT. IT IS NOT THE CASE OF THE DEPARTMENT WHER E SHRI M.H. ANDURE, SHRI MAHAJAN AND OTHERS HAVE BEEN HELD AS 'BENAMIDARS ' OF THE APPELLANT. ON THE CONTRARY THE AMOUNTS MENTIONED IN THE SAID PAGE 24 OF DIARY A-71 STANDS REFLECTED IN THE RUNNING ACCOUNT OF SHRI M.H. ANDURE WHICH HAS BEEN OWNED BY HIM IN HIS STATEMENT RECORDE D U/S. 132(4). III) REFERENCE IS MADE TO VARIOUS STATEMENTS MADE BY THE APPELLANT AND OTHERS IN CONNECTION WITH THE SAID PROPERTY AT T HE TIME OF SEARCH OPERATIONS WHICH CLEARLY ESTABLISHES THAT THE PROPERTY WAS IN THE JOINT OWNERSHIP OF SHRI M.H. ANDURE, SHRI PRASHANT MAHAJAN AND SHRI GOPAL GORTE. (PAGE NO. 54 OF STATEMENT OF THE APPELLANT RE CORDED U/S. 132(4) DT. 23-11-2001 AND QUE. NO. 51 OF STATEMENT GIVEN U/ S. 132(4) DT. 23-11-2001 BY SHRI M.H. ANDURE). 56 IV. IT IS ALSO WORTHWHILE TO POINT OUT HERE THAT SHRI PRASHANT MAHAJAN HAD MORTGAGED HIS SHARE OF PROPERTY TO BANK F OR OBTAINING LOAN AND THE SAID TRANSACTION HAS ALSO BEEN REGISTERED W ITH THE REGISTRAR AUTHORITY. THIS EVIDENCE CLEARLY ESTABLISHES THAT THE P ROPERTY WAS OWNED BY SHRI P.B. MAHAJAN AND USED FOR HIS BENEFIT. V. LASTLY IT IS ALSO OBSERVED THAT SHRI M.H. ANDURE HAD OFFERED RS.16.30 LACS IN HIS BLOCK RETURN, SHRI PRASHANT MAH AJAN HAS OFFERED RS.11.07 LACS AND SHRI GOPAL GORTE HAS SUBMITTED AN AFF IDAVIT OF HAVING INVESTED RS.5.70 LACS IN THE SAID PROPERTY. 5.6 IN VIEW OF THE ABOVE, I HAVE NO HESITATION TO HO LD THAT THE INVESTMENT IN THE SAID MITMITA PROPERTY TO THE TUNE O F RS.34.30 LACS HELD AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE AP PELLANT IS NOT MAINTAINABLE IN VIEW OF THE EVIDENCE PLACED ON RECO RD AND STATEMENT OF THE CONCERNED PARTIES. ACCORDINGLY, THE ADDITION OF RS.34.30 LACS IN THE HANDS OF APPELLANT IS DIRECTED TO BE DELETED. HOWEVE R, THERE IS NO DOUBT THAT THE INVESTMENT OF RS.34.30 LACS IN THE SAID PROPER TY IS UNACCOUNTED AND, THEREFORE, SURELY NEED TO BE TAXED AS UNDISCLOSED INCOME ON SUBSTANTIVE BASIS IN THE HANDS OF SHRI M.H. ANDURE AND S HRI P.B. MAHAJAN. EFFECT TO THIS FINDING SHALL BE GIVEN IN TH E APPELLATE ORDER OF THESE TWO PERSONS. 11.5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE LAND IN QUESTION WAS PURCHASED BY 4 PERSONS NAMELY SHRI P.B . MAHAJAN, SHRI S.H. ANDURE (BROTHER OF SHRI M.H. ANDURE), SHRI GOP AL GORTE (BROTHER- IN-LAW OF SHRI P.B. MAHAJAN) AND SHRI SIDDARAM NALG E. THESE PERSONS HAD THEIR INDIVIDUAL SEPARATE SHARE IN THE LAND WHI CH WERE IDENTIFIABLE. FROM PAPER BOOK PAGES 478 AND 479 WE FIND SHRI P.B. MAHAJAN HAD SOLD HIS PORTION OF LAND TO M/S. MEGH SEEDS PVT. LT D. AND THIS LAND WAS SHOWN IN THE BALANCE SHEET OF M/S. MEGH SEEDS PVT. LTD. PRIOR TO THE SEARCH. THE PROPERTY DOCUMENTS SUCH AS PURCHASE DE ED, 7/12 EXTRACTS ETC. ARE IN THE NAMES OF RESPECTIVE PERSONS WHO HAV E ACCEPTED THE 57 OWNERSHIP AND HAVE DECLARED THE INVESTMENT THROUGH THEIR RESPECTIVE CASH FLOWS. 12.1 WE FIND SHRI M.H. ANDURE IN HIS STATEMENT RECO RDED U/S.132(4) HAS ADMITTED THAT THE PROPERTY HAS BEEN PURCHASED B Y HIM ALONG WITH OTHERS. WE FIND SHRI M.H. ANDURE AND SHRI P.B. MAH AJAN HAVE DECLARED THE INVESTMENT IN THEIR RESPECTIVE CASH FL OW STATEMENTS. FURTHER, THE ASSESSING OFFICER HAD ALSO MADE ADDITI ON IN THEIR HANDS ON PROTECTIVE BASIS MEANING THEREBY HE IS NOT SURE WHE RE TO ADD THE UNDISCLOSED INCOME. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) WE ARE OF TH E CONSIDERED OPINION THAT THE ADDITION IN THE HANDS OF THE ASSES SEE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS UNCALLED FOR. WE THER EFORE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUND RA ISED BY THE REVENUE IS DISMISSED. 13. IN GROUND OF APPEAL NO.24 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE INVESTMENT OF RS.4,80 ,428/- ON ACCOUNT OF INVESTMENT IN PADEGAON LAND. 13.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER NOTED THAT THE INVESTMENT OF RS.9,50,000/- IN PADEGAON FA RM IS ADMITTED BY SHRI M.H. ANDURE DURING BLOCK ASSESSMENT PROCEEDING S IN HIS CASE. HOWEVER, HE NOTED THAT SOME PART OF THE EXPENDITURE FOR PADEGAON FARM IS ALSO BORNE BY THE ASSESSEE THROUGH THE RUNNING A CCOUNT OF SHRI M.H. ANDURE AS APPEARING IN THE SEIZED DIARIES OF THE AS SESSEES. HE NOTED THAT THE ENTRY ON PAGE 23 OF A-71 SHOWS THAT THE AMOUNT OF RS. 2,81,428/- WAS DEDUCTED FROM THE RUNNING ACCOUNT OF SHRI M.H. ANDURE ON ACCOUNT 58 OF PADEGAON FARM. HE FURTHER NOTED THAT THE ENTRY O N PAGE 22(OL) OF A- 71 OF MARCH, 99 SHOWS THAT FURTHER EXPENDITURE OF R S. 1.99 LAKHS WAS ALSO INCURRED THROUGH THE RUNNING ACCOUNT OF SHRI M .H. ANDURE AND IT WAS DEDUCTED FROM THAT ACCOUNT. SINCE, THE FUNDS RE CORDED IN THE RUNNING ACCOUNT OF SHRI M.H. ANDURE ARE ADVANCED BY THE ASSESSEE, THE AGGREGATE AMOUNT OF RS.4,80,428/- BEING TOTAL OF RS .2,81,428/- AND RS.1,99,000/- IN RESPECT OF PADEGAON FARM DEDUCTED FROM THE SAID RUNNING ACCOUNT IS ALSO OUT OF THE FUNDS OF ASSESSE E. HE, THEREFORE, TAXED THE AMOUNT OF RS.4,80,428/- IN THE HANDS OF THE ASS ESSEE AS HIS UNDISCLOSED INCOME. 14. BEFORE CIT(A) THE ASSESSEE STRONGLY OBJECTED TO THIS ADDITION AND ARGUED THAT THE ASSESSING OFFICER HAS WRONGLY ADDED RS. 4,80,428/- BEING EXPENSES INCURRED OUT OF RUNNING ACCOUNT OF S HRI. M. H. ANDURE ON ACCOUNT OF INVESTMENT IN PADEGAON FARM. IT WAS P OINTED OUT THAT THE ASSESSING OFFICER HAS FAILED TO CONSIDER STATEMENT OF SHRI. M.H. ANDURE & SHRI. P.B. MAHAJAN U/S 132 (4), STATEMENTS U/S 13 1 AND AFFIDAVITS AND SUBMISSIONS FILED BEFORE D.D.I.T. (INV.) AURANGABAD AND THE ASSESSING OFFICER DURING POST SEARCH & BLOCK ASSESSMENT PROCE EDINGS. IT WAS POINTED OUT THAT THE ASSESSEE HAS REPEATEDLY STATE D RIGHT FROM THE DATE OF SEARCH THAT HE HAS RECORDED TRANSACTIONS OF HIS REL ATIVES ON THEIR INSTRUCTIONS. THE LAND AT PADEGAON (TISGAON) IS IN THE NAME OF MR. P.B. MAHAJAN BUT THE SOURCE OF THE SAME IS FROM THE INCO ME OF MR. M.H. ANDURE, MR. P.B. MAHAJAN AND MR. B.B. MAHAJAN WHICH IS AS UNDER : MR. M. H. ANDURE RS. 9,50,000.00 MR. P. B. MAHAJAN RS. 16,17,943.00 MR. B. B. MAHAJAN RS. 3,06,482.00 TOTAL RS. 28,74,425.00 59 14.1 IT WAS ARGUED THAT THE INVESTMENTS OF THE AFOR ESAID PERSONS ARE CONSIDERED IN THEIR RESPECTIVE BLOCK RETURNS. SHRI. P. B. MAHAJAN IS THE ORIGINAL OWNER OF THE SAID PROPERTY. ALL THE DOCUME NTS OF THE SAID PROPERTY I.E. 7/12 EXTRACT, PURCHASE DEEDS, LIGHT B ILL, PROPERTY TAXES, ETC. ARE BORNE BY MR. P.B. MAHAJAN HIMSELF. THE NO OBJEC TION CERTIFICATE FROM CIDCO WAS ALSO OBTAINED BY SHRI. P.B. MAHAJAN ONLY. IT WAS ARGUED THAT THE ENTRIES RECORDED ON PG. 22, OF ANNE XURE A-71, ARE THE FIGURES OF CONTRIBUTION MADE BY SHRI. M. H. ANDURE, REGARDING EXPENSES INCURRED BY HIM. THE SAID FIGURES OF RS.2, 81,428/- AND RS.1,99,000/- ARE DEDUCTED FROM HIS RUNNING ACCOUNT ON HIS INSTRUCTIONS. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ABOVE LAN D IS NOT OWNED BY THE ASSESSEE OR SOURCE OF THE SAID INVESTMENT IS NOT OF THE ASSESSEE. IT IS WRONG TO ASSUME THAT THE EXPENDITURE OF RS.4,80,428 /- ( RS.1,99,000 + RS. 2,81,428) IS INCURRED BY THE ASSESSEE AND IT IS HIS UNDISCLOSED INCOME. IT WAS ACCORDINGLY ARGUED THAT THE CONCLUSI ON DRAWN BY THE ASSESSING OFFICER IS NOT ACCEPTABLE AND HENCE ADDIT ION OF RS. 4,80,428/- MAY BE DELETED. 14.2 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO WHO STATED T HAT THOUGH THE INVESTMENT IN PADEGAON FARM WAS ADMITTED BY SHRI M. H. ANDURE BUT FOR THE REASON THAT PART OF THE EXPENDITURE FOR THE SAID FARM WAS ALSO BORNE BY THE ASSESSEE (AS DISCUSSED IN THE BLOCK AS SESSMENT ORDER ON THE BASIS OF SEIZED DIARY) THE ADDITION DESERVES TO BE SUSTAINED. IN HIS REJOINDER THE ASSESSEE POINTED OUT THAT THE ASSESSI NG OFFICER HAS ALLEGED THAT THOUGH THE INVESTMENT IN PADEGAON FARM WAS ADM ITTED BY SHRI.P.B.MAHAJAN [WRONGLY STATED AS M.H. ANDURE IN REMAND REPORT], 60 BUT FOR THE REASON THAT PART OF THE EXPENDITURE FOR THE SAID FARM WAS ALSO BORNE BY THE ASSESSEE, THE ADDITION OF RS. 4,80,428 /- DESERVES TO BE DELETED. 15. CONSIDERING THE ARGUMENTS OF THE ASSESSEE AND R EMAND REPORT OF THE AO, THE LD. CIT(A) DELETED THE ADDITION FROM TH E HANDS OF THE ASSESSEE BY OBSERVING AS UNDER : 6.5 AFTER CONSIDERING THE FACTS OF THE CASE, THE ARGU MENTS OF THE LEARNED AUTHORISED REPRESENTATIVE AND THE REMAND REPORTS OF THE AO, I FIND THAT THIS ADDITION IS ALSO NOT SUSTAINABLE. THE AO HAS RE LIED ON THE ENTRY ON PAGE 22 (OL) AND 23 OF THE DIARY NO.A-71 WHICH SHOWS AMOUNT OF RS.4,80,428/- WERE DEDUCTED FROM THE RUNNING ACCOUNT OF SHRI M.H. ANDURE ON ACCOUNT OF PADEGAON FARM. THIS ADDITION H AS BEEN MADE JUST ON THE PRESUMPTION THAT THE ENTIRE AMOUNT SHOWN IN T HE RUNNING ACCOUNT IS ACTUALLY ADVANCE FROM THE ASSESSEE TO SHRI M.H.A NDURE. HOWEVER, THIS FINDING OF AO HAS BEEN REJECTED BY ME IN THE PRECED ING PARA. FURTHER, IT IS ALSO WORTHWHILE TO MENTION HERE THAT THE PLOT AT PAD EGAON FARM WAS PURCHASED BY SHRI P.B.MAHAJAN AT A COST OF RS.28.74 LA CS AND THE SAME HAS ALSO BEEN ASSESSED AS UDI IN THE BLOCK RETURN OF SHRI P.B.MAHAJAN, B.B.MAHAJAN AND SHRI M.H.ANDURE ON SUBSTANTIVE BASI S BY THE AO. THE AO HAS THUS CONSIDERED THE OWNERSHIP OF THE LAND WITH MR.MAHAJAN AND MR.ANDURE AND ACCORDINGLY HE HAS CONSIDERED THE INVES TMENT ON SUBSTANTIVE BASIS IN THEIR RESPECTIVE HANDS. THEREF ORE, THERE IS NO QUESTION OF CONSIDERING THE FENCING AND OTHER EXPENSE S OF RS.4.80 LACS ON THE PADEGAON FARM IN THE HANDS OF THE ASSESSEE O N SUBSTANTIVE BASIS. 6.6 CONSIDERING THE FACT THAT THE PADEGAON FARM PROP ERTY IS OWNED BY SHRI PRASHANT MAHAJAN AS EVIDENT FROM THE PURCHASE DEED AND 7/12 EXTRACT, THERE APPEARS NO JUSTIFICATION FOR TREATING THE EXPENSES IN THE HANDS OF THE ASSESSEE. IT IS NOT UNDERSTOOD AS TO W HY AND HOW THE ASSESSEE WOULD HAVE INCURRED EXPENSES ON SUCH FARM WHICH DOE S NOT BELONG TO HIM. IT IS PERTINENT TO MENTION HERE THAT THE SAID EXPEN SES APPEAR AS DEDUCTION IN THE RUNNING ACCOUNT OF SHRI M.H. ANDURE IN DIAR Y A-71 WHICH HAS BEEN ADMITTED AS HIS TRANSACTION IN THE STATEMENT GIVEN BY HIM U/S.132(4) AND, THEREFORE, LOGICALLY AND RATIONALLY THE CORRESPONDING EXPENSES WHICH APPEAR IN THE SAID RUNNING ACCOUNT HA VE TO BE TREATED AS UNEXPLAINED EXPENSES IN THE HANDS OF SHRI M.H. ANDURE AND NOT THE ASSESSEE. I AM, THEREFORE, TO HOLD THAT ADDITION OF RS.4 ,80,428/- IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED AND HENCE DELETED. HOWEVER, I FIND THAT THE EXPENSES OF RS.4,80,428/- HAS NOT BEEN OFFERED AS UDI BY SHRI M.H. ANDURE NOR IT HAS BEEN ASSESSED ON PROTEC TIVE BASIS IN HIS HANDS BY THE AO. IN VIEW OF MY FINDING HOLDING THAT THE SAID EXPENSES HAVE BEEN INCURRED BY SHRI M.H. ANDURE WHICH DOES N OT STAND DISCLOSED IN HIS BOOKS OF ACCOUNT, THE SAME SHALL BE CONSIDERE D AS UDI IN HIS HANDS, WHILE DECIDING THE APPEAL OF SHRI M.H. ANDURE. IN T HE RESULT, THE APPEAL ON THIS GROUND IS ALLOWED. 15.1 AGGRIEVED WITH SUCH ORDER OF CIT(A), THE REVEN UE IS IN APPEAL BEFORE US. 61 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE AO MADE ADDITION ON ACCOUNT OF 2 ENTRIES BEING TOTAL OF RS. 2,81,428/- AND RS.1,99,000/- ON THE BASIS OF ENTRY ON PAGE 22 AND 23 OF THE DIARY NO.A-71 WHICH SHOWS THE AMOUNT OF RS.4,80,428/- WAS DEDUCTED FROM THE RUNNING ACCOUNT OF SHRI M.H. ANDURE ON ACCOUNT OF PADEGAON FARM. THIS ADDITION WAS MADE BY THE AO ON THE PRESUMPTION THAT THE ENTIRE AMOUNT SHOWN IN THE RUNNING ACCOUNT IS ACTUALLY THE ADVANCE FROM THE ASSESSEE TO SHRI M.H. ANDURE. 16.1 WE FIND THE LD.CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE PLOT AT PADEGAON FARM WAS PURCHASED BY SHRI P.B . MAHAJAN AT A COST OF RS.28.74 LAKHS AND THE SAME HAS BEEN ASSESSED AS UNDISCLOSED INCOME IN THE BLOCK RETURN OF SHRI P.B. MAHAJAN, SH RI B.B. MAHAJAN AND SHRI M.H. ANDURE ON SUBSTANTIVE BASIS. SINCE T HE PURCHASE DEEDS, 7/12 EXTRACTS ARE IN THE NAME OF SHRI P.B. MAHAJAN AND SHRI M.H. ANDURE ETC. AND SINCE SHRI M.H. ANDURE IN HIS STATE MENT RECORDED U/S.132(4) HAS ADMITTED THAT THE SAME HAS TO BE TRE ATED AS HIS UNEXPLAINED EXPENSES, THEREFORE, THE CIT(A) DELETED THE ADDITION. THIS REASONED FINDING OF THE LD.CIT(A) DO NOT REQUIRE AN Y INTERFERENCE FROM OUR SIDE. WE, ACCORDINGLY, UPHOLD THE SAME AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 17. IN GROUND OF APPEAL NO.25 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.33,47, 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FLAT AT MUMBAI, ZEN CAR AND INVESTMENT IN RENUKA PROPERTIES. 62 17.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT A LOOSE PAPER MARKED 16 INVENTORISED AS A-72 WAS SEIZED FROM THE RESIDENCE OF THE ASSESSEE. THIS LOOSE PAPER SHOWS THE FOLLOWING THR EE TRANSACTIONS : (1) THE COST OF A FLAT AT MUMBAI AT RS.80.94 LAKHS DI VIDED INTO TWO PARTS SHOWING ONE HALF SHARE AS RS.40.47 LAKHS. THE AMO UNT OF RS.1.01 IS SHOWN AS ALREADY PAID & IT IS DEDUCTED. THE BALANCE OF RS.39.96 LAKHS IS SHOWN WITH A REMARK TO WRITE. 2) THERE IS ONE MORE TRANSACTION IN RESPECT OF ONE Z EN CAR WHICH IS SHOWN AT RS.3.86 LAKHS & THE AMOUNT OF RS. 6,500/- BE ING THE VALUE OF GOLD COIN IS DEDUCTED & THE REMAINING AMOUNT OF RS. 3.80 LACS IS WRITTEN WITH A REMARK 'TO WRITE'. 3) THERE IS A THIRD TRANSACTION PERTAINING TO RE NUKA RESIDENCE. THE COST OF THIS PROPERTY IS SHOWN AT RS.25.50 LAKHS OUT OF W HICH RS.17.00 LAKH IS STATED TO BE 'ALREADY WRITTEN IN ACCOUNT' & T HE REMAINING RS.8.50 LAKHS WITH A REMARK 'BALANCE TO WRITE + REGIS TRATION EXPENDITURE'.SIMILAR ENTRIES APPEAR ON PAGE 14 OF A- 71 & PAGE 6 OF A-71. THE ENTRIES APPEARING ON PAGE NO. 14 OF A-71 AMOUNTS TO RS. 15.00 WITH NARRATION 'VAIDYA-SANJAY' & THE ENTRY ON PAGE NO. 6 OF A-71 AMOUNTS TO RS. 2.00. THE SUM TOTAL OF THESE ENTRIES IS RS. 17 LAC S & BOTH THE ENTRIES ARE DEDUCTED FROM THE RUNNING ACCOUNT OF MR. M.B. P ATIL. ON PAGE 5(OL) OF DIARY A-71 & PAGE 24 OF DIARY A-67 THERE APPEARS SOME ENTRIES WHICH ARE SIMILAR TO ENTRIES FOUND ON PAGE 16 OF A-72 TOTA LING RS.51.76 LACS. THE DETAILS OF ALL THE THREE TRANSACTION APPEARING O N PAGE 16 OF A-72 IS ALSO GIVEN THERE. THE INFERENCE DRAWN BY THE A.O. I S THAT ALL THE ENTRIES PERTAIN TO INVESTMENTS IN MUMBAI FLAT, ZEN CAR & REN UKA PROPERTY BY THE ASSESSEE. HE FURTHER ADDS THAT THE AMOUNT IN RE SPECT OF RENUKA PROPERTY IS ALSO TAXED IN THE HANDS OF MR. PRASHANT M AHAJAN ON 'PROTECTIVE BASIS' SINCE IT HAS BEEN OFFERED IN HIS BLOCK RETURN. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE, THE AO MADE ADDITION OF RS.33,47,000/- AS UNDISCLOSED INCO ME IN THE HANDS OF THE ASSESSEE. 17.2 BEFORE CIT(A) IT WAS SUBMITTED THAT THE ZEN CA R WAS PURCHASED BY MR.RAJU PADAMPALLIKAR DURING F.Y. 1998 -99 AND THE ASSESSEE PURCHASED THE SAME CAR FROM MR.RAJU PADAMP ALLIKAR IN NOVEMBER 2001 FOR AN AMOUNT OF RS.96,000/-. SO FAR AS RENUKA PROPERTY IS CONCERNED IT WAS SUBMITTED THAT THE SA ID PROPERTY WAS 63 PURCHASED IN THE NAME OF SHRI SANJAY MAHAJAN AND TH E AMOUNT HAS BEEN OWNED UP BY SHRI P.B. MAHAJAN IN HIS BLOCK RET URN. AS FAR AS THE FLAT AT MUMBAI IS CONCERNED IT WAS SUBMITTED TH AT THE SAID FLAT IS OWNED BY SHRI M.B. PATIL WITH 2 OTHERS AND NOT BY T HE ASSESSEE. IT WAS ACCORDINGLY SUBMITTED THAT THERE IS NO REASON T O HOLD THAT THESE PROPERTIES ARE ACQUIRED BY THE ASSESSEE SO AS TO BE TAXED IN HIS HANDS. 17.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONFRONTING THE SAME TO THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 7.7 AFTER CONSIDERING THE FACTS OF THE CASE, THE SUBMI SSIONS OF THE LD. AUTHORISED REPRESENTATIVE AND THE REMAND REPORTS OF TH E AO AND ALSO THE FINDING GIVEN BY ME ON THE ISSUES RAISED IN GROUND NOS. 1 & 2 OF THIS APPEAL, THERE IS NO REASON FOR TAKING A DIFFERENT VIE W ON THIS ISSUE. THESE TRANSACTIONS HAVE BEEN OWNED AND OFFERED IN THE PETITION BEFORE THE SETTLEMENT COMMISSION BY SHRI M.B. PATIL. THE TR ANSACTIONS ON MUMBAI FLAT AND ZEN CAR PERTAINED TO SHRI M.B. PATI L WHICH HE HAS ADMITTED BEFORE THE SETTLEMENT COMMISSION WHILE OFFER ING THE INCOME OF CONTRACT RECEIPTS REFLECTED IN THE SEIZED DIARY. SHRI M.B. PATIL IN HIS STATEMENT RECORDED U/S.131 DT. 14-01-2002 AT QUE NO.7 3 HAS OWNED UP THE MUMBAI FLAT WHICH IS ALSO EVIDENT FROM THE FACT T HAT THE SAID PROPERTY WAS REGISTERED IN THE NAME OF SHRI M.B. PATI L AND SHRI VINODKUMAR SHRIRAMWAR. CONSIDERING THE FACT THAT THE PROPERTY IS REGISTERED IN THE NAME OF SHRI M.B. PATIL AND OTHERS, THE EVIDENCE OF WHICH WAS MADE AVAILABLE BEFORE ME, THERE APPEARS NO JUSTIFICATION FOR TREATING THE INVESTMENT IN THE SAID PROPERTY IN THE H ANDS OF THE ASSESSEE. IT IS NOT THE CASE OF THE DEPARTMENT WHEREIN IT HAS BEEN ESTABLISHED THAT SHRI M.B. PATIL WAS THE 'BENAMIDAR' O F THE ASSESSEE IN THE SAID PROPERTY AND, THEREFORE, UNDER NO CIRCUMSTAN CES CAN THIS BE TREATED AS INVESTMENT IN THE HANDS OF THE ASSESSEE MERELY ON THE ENTRIES APPEARING IN THE RUNNING ACCOUNT OF SHRI M.B. PATIL . I MAY STATE HERE THAT SHRI M.B. PATIL IN HIS STATEMENT HAS ALSO OWNED UP THE TRANSACTIONS APPEARING IN THE SAID RUNNING ACCOUNT AS HIS CONTRACT RECEIPTS WHICH HAVE BEEN OFFERED IN HIS PETITION AND ADMITTED BY TH E SETTLEMENT COMMISSION. HOWEVER, GOING BY THE NATURE OF THE TRANSA CTIONS AND RECORDS OF SHRI M.B. PATIL, I AM OF THE VIEW THAT IT IS NOT DISCLOSED IN HIS BOOKS OF ACCOUNT AND HENCE NEEDS TO BE TAXED AS UDI IN HIS HANDS. A PETITION TO THIS EFFECT MAY BE MADE TO THE SETTLEMEN T COMMISSION CONSEQUENT TO MY FINDING ON THIS GROUND OF APPEAL. 7.7 AS FAR AS INVESTMENT IN RENUKA PROPERTY IS CONCERNE D, IT IS OBSERVED THAT THE SAID PROPERTY WAS REGISTERED IN THE NAME OF S HRI SANJAY MAHAJAN, BROTHER OF SHRI PRASHANT MAHAJAN WHICH IS EV IDENT FROM THE COPY OF THE PURCHASE DEED PRODUCED BEFORE ME. THEREF ORE, CONSIDERING THE FACT THAT THE PROPERTY WAS OWNED BY SHRI SANJAY MAHAJAN AND 64 WHICH HAS BEEN OFFERED AS UDI BY HIS BROTHER SHRI PR ASHANT MAHAJAN IN THE BLOCK RETURN, THERE CANNOT BE ANY CASE OF HOLDIN G INVESTMENT IN SUCH PROPERTY IN THE NAME OF THE ASSESSEE. IT IS PERTINE NT TO MENTION HERE THAT SHRI PRASHANT MAHAJAN IN HIS STATEMENT RECOR DED U/S. 132(4) DT. 22-11-2001 HAD STATED THAT THE SAID PROPERTY WAS B OUGHT BY HIM IN THE NAME OF HIS BROTHER SHRI SANJAY MAHAJAN OUT OF HIS OWN UNDISCLOSED INCOME (QUE. NO. 29). FURTHER THE ASSESSEE ALSO IN HIS STA TEMENT U/S. 132(4) AT PAGE NO. 32 HAS CLEARLY STATED THAT THE PRO PERTY WAS PURCHASED BY SHRI SANJAY MAHAJAN AND, THEREFORE, HE HAD NO CONNECTION WITH THE SAME. I FIND THAT THE AO IN TOTAL DISREGAR D TO THE PURCHASE DEED OF THE SAID PROPERTY AS ALSO THE STATEMENTS OF THE ASSESSEE AND SHRI P.B. MAHAJAN HAS PROCEEDED TO HOLD IT AS UNEXPL AINED INVESTMENT IN THE HANDS OF THE ASSESSEE. I HAVE PERUSED THROUGH T HE ENTRIES APPEARING IN RESPECT OF THE SAID PROPERTY IN THE RUN NING ACCOUNT OF SHRI M.B. PATIL AND DO NOT FIND ANY EVIDENCE SUGGESTING TH AT THE ASSESSEE HAD INVESTED IN THE SAID PROPERTY. THE AO ALSO HAS NOT ESTAB LISHED THAT SHRI SANJAY MAHAJAN, OWNER OF THE SAID PROPERTY WAS 'BENAM IDAR' AND, THEREFORE, IN THE ABSENCE OF ANY CORROBORATIVE EVIDE NCE, THE UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. 7.8 I MAY ADD HERE THAT THERE APPEARS A PARADOXICAL SITUATION WHEREIN THE INVESTMENT IN THE SAID PROPERTY HAS BEEN HELD TO BE UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE WHILE AT T HE SAME TIME, THE RENTAL INCOME FROM THE SAID PROPERTY HAS BEEN TAX ED AS UDI IN THE HANDS OF SHRI PRASHANT B. MAHAJAN. THIS REFLECTS OF A N INHERENT CONTRADICTION. AS A MATTER OF FACT TAXING OF RENTAL INCOME FROM THIS PROPERTY IN THE HANDS OF SHRI P.B. MAHAJAN BY THE AO , CONTRADICT HIS FINDING IN TAXING THE INVESTMENT IN THE SAID PROPERTY IN THE HANDS OF THE ASSESSEE. I HAVE, THEREFORE, NO IOTA OF DOUBT TO HOLD T HAT THE ASSESSEE HAD NO NEXUS WITH THE INVESTMENT IN THE SAID PROPERTY AND, THEREFORE, THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS DIRECT ED TO BE DELETED. I MAY MENTION HERE THAT SHRI PRASHANT MAHAJAN HAS OFFER ED UNEXPLAINED INVESTMENT IN THE RENUKA PROPERTY AT RS.24.61 LACS WHE REAS THE INVESTMENT REFLECTED IN THE RUNNING ACCOUNT OF THE D IARY A-71 IS OF RS.25.50 LACS WHICH HAS ALSO BEEN ADMITTED AS HIS INVESTME NT IN THE STATEMENT GIVEN BY SHRI P.B. MAHAJAN. THUS, THERE IS A SHORT DISCLOSURE OF RS.89,000/- IN THE BLOCK RETURN OF SHRI P.B. MAHA JAN AND HENCE THE SAME SHALL BE ADDED TO THE TOTAL UNEXPLAINED INVESTMEN T IN THE SAID PROPERTY TO BE TAXED AS UDI IN HIS HANDS ON SUBSTANTIVE BASIS 7.9 LASTLY, AS FAR AS THE UNEXPLAINED INVESTMENT IN THE CAR IS CONCERNED, I FIND THAT THE SAID VEHICLE WAS REGISTERED IN THE NAME OF SHRI RAJU PADAMPALLIKAR AND WAS NOT FOUND IN THE POSSE SSION OF THE ASSESSEE AT THE TIME OF SEARCH AND SEIZURE OPERATIONS. TH E CONFIRMATION TO THIS EFFECT WAS ALSO FILED BY SHRI RAJ U PADAMPALLIKAR BEFORE THE AO. IT IS ALSO BEEN BROUGHT TO MY NOTICE T HAT THE SAID CAR WAS ALSO SEIZED BY THE FINANCE COMPANY FROM THE SAID PERSON ON ACCOUNT OF DEFAULT IN REPAYMENTS. THESE ARE VITAL EVIDENCES TO SHO W THAT THE SAID CAR WAS PURCHASED BY SHRI RAJU PADAMPALLIKAR AND, THE REFORE, PROVES THAT THE ASSESSEE HAS NO INVOLVEMENT WHATSOEVER IN THE SAI D CAR. IN THE LIGHT OF ABOVE, I HAVE NO HESITATION TO HOLD THAT TH E ASSESSEE WAS NOT CONNECTED EVEN REMOTELY WITH THE INVESTMENT IN THE SA ID CAR AND, THEREFORE, IT COULD NOT BE TAXED AS UDI IN HIS HANDS. 7.10 IN VIEW OF THE DISCUSSION IN THE PRECEDING PARA T HE ADDITION OF RS.33.47 LACS MADE BY THE AO ON ACCOUNT OF UNEXPLAINE D INVESTMENT IN RENUKA PROPERTY, ZEN CAR AND MUMBAI FLAT IN THE HAN DS OF THE ASSESSEE IS NOT JUSTIFIABLE AND HENCE DELETED. 65 17.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. THE TRANSATIONS RELATING TO MUMBAI FLAT AND ZEN CAR PERTAIN TO SHRI M.B. PATIL WHO HAS ADMITTED THE SAME IN HIS PETITION BEFORE THE HONBL E SETTLEMENT COMMISSION OFFERING THE CONTRACT INCOME AND VARIOUS OTHER INVESTMENTS RELATING TO HIM REFLECTED IN THE SEIZED DIARY. WE HAVE ALREADY UPHELD THE FINDING OF THE LD.CIT(A) ON THIS ISSUE WHILE DE CIDING THE GROUNDS OF APPEAL NO.1 TO 22 FILED BY THE REVENUE. IN VIEW OF THE SAME AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT( A) WHILE DELETING THE ADDITION IN RESPECT OF ZEN CAR AND MUMBAI FLAT, WE FIND NO INFIRMITY IN THE ORDER OF LD.CIT(A) DELETING THE AD DITION ON ACCOUNT OF ZEN CAR AND MUMBAI FLAT. 18.1 SO FAR AS IN THE INVESTMENT IN RENUKA PROPERTY IS CONCERNED, WE FIND THE SAID PROPERTY WAS REGISTERED IN THE NAME O F SHRI SANJAY MAHAJAN, BROTHER OF SRI P.B. MAHAJAN. THE SAME HAS BEEN CONSIDERED BY SHRI P.B. MAHAJAN IN HIS BLOCK RETURN AS HIS UND ISCLOSED INCOME. SHRI P.B. MAHAJAN HAS ALSO ADMITTED IN HIS STATEMEN T RECORDED U/S.132(4) THAT THE SAID PROPERTY WAS BOUGHT BY HIM IN THE NAME OF HIS BROTHER. WE FURTHER FIND WHILE THE AO HAS TREATED THE SAID PROPERTY AS UNDISCLOSED INVESTMENT IN THE HANDS OF THE ASSESSEE , HOWEVER, HE HAS TAXED THE RENTAL INCOME IN THE HANDS OF SHRI P.B. M AHAJAN AS HIS 66 UNDISCLOSED INCOME WHICH IS CONTRADICTORY. THEREFO RE, THE SAME IN OUR OPINION SHOULD NOT HAVE BEEN CONSIDERED IN THE HAND S OF THE ASSESSEE AS HIS UNDISCLOSED INCOME. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ON THIS I SSUE WE FIND NO INFIRMITY IN THE SAME. ACORDINGLY, THE ORDER OF LD .CIT(A0 ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS D ISMISSED. 19. IN GROUND OF APPEAL NO.26 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 5 LAKHS MADE BY THE AO ON ACCOUNT OF INVESTMENT IN SHOPS AT APNA BAZAR. 19.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ENTRY ON P AGE 7 (OL) OF THE DIARY A-68 SEIZED FROM THE ASSESSEE SHOWS THAT THE AMOUNT OF RS.5 LAKHS IN RESPECT OF SHOPS IS DEDUCTED FROM THE RUNN ING ACCOUNT OF SHRI M.H. ANDURE IN THE MONTH OF AUGUST, 1997. THIS ACC ORDING TO THE AO SHOWS THAT THE INVESTMENT OF RS.5 LAKHS IN SHOPS WAS MADE BY THE ASSESSEE. HE NOTED THAT THE ENQUIRIES MADE ON THE BASIS OF SEIZED DOCUMENTS OF SHRI M.H. ANDURE SHOWED THAT THE SHOP NO.101 IN APNA BAZAR WAS PURCHASED IN THE NAME OF SHRI M.H. A NDURE AND IN RESPECT OF THAT SHOP HE HAD INITIALLY DECLARED THE AMOUNT OF RS.1,00,000/- AS HIS UN-DISCLOSED INVESTMENT IN THE STATEMENT U/S 132(4). DURING BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI M.H. ANDURE, HE STATED THAT THE CORRECT INVESTMENT IN SH OP NO. 101 WAS OF RS.1,31,280/-. THE RENT FROM THIS SHOP WAS ALSO NOT DISCLOSED BY SHRI M.H. ANDURE BEFORE THE DATE OF SEARCH. HE NOTED TH AT THE INVESTMENTS IN THE SHOP NO. 102 & 112 AT APNA BAZAR WERE ALREADY D ISCLOSED BY SHRI PRASHANT MAHAJAN IN HIS RETURNS FILED PRIOR TO THE DATE OF SEARCH. THE 67 INVESTMENT IN SHOP NO.111 AT APNA BAZAR WAS DECLAR ED BY SHRI PRASHANT MAHAJAN AS HIS UN-DISCLOSED INVESTMENT IN THE STATEMENT U/S 132(4). THE RENT IN RESPECT OF SHOP NO.112 WAS AL READY SHOWN BY SHRI PRASHANT MAHAJAN IN HIS REGULAR RETURNS. HOWEVER, THE RENT OF SHOP NO. 102 & SHOP NO. 111 WERE NOT SHOWN BY HIM IN THE REG ULAR RETURNS. HE OBSERVED THAT THE ENTRIES IN THE RUNNING ACCOUNT OF SHRI M.H. ANDURE IN THE SEIZED DIARIES OF THE ASSESSEE SHOW THAT THE RE NTAL INCOME FROM THESE FOUR SHOPS IS ALSO ADDED TO THE BALANCES IN THE ACC OUNT OF SHRI M.H. ANDURE IN THE SAID DIARIES. HE OBSERVED THAT IN PA GE NO. 23 OF DIARY NO.A- 71, THE RENT OF RS. 1.86 LAKHS OF FOUR SHOPS FOR TH E YEAR FROM 01/6/98 TO 31/05/99 IS ADDED TO THE ACCOUNT OF SHRI M.H. ANDUR E. FURTHER ON PAGE NO. 4 OF DIARY NO. A-67, THE RENT OF RS.1,17,500/- OF THREE SHOPS FOR THE PERIOD FROM JUNE, 99 TO MARCH, 2000 IS ADDED TO THE ACCOUNT OF SHRI M.H. ANDURE. 19.2 THE AO NOTED THAT ON PAGE NO. 5(OL) OF DIARY N O. A-67, THE RENT OF RS.36,000/- OF THREE SHOPS FOR THE PERIOD FROM A PRIL, 2000 TO JUNE, 2000 IS ADDED TO THE ACCOUNT OF SHRI M.H. ANDURE. S IMILARLY, ON PAGE NO. 23 OF DIARY NO. A-67, THE RENT OF RS.12,000/- OF ON E SHOP NO. 113 FOR THE PERIOD OF THREE MONTHS IS ADDED TO THE ACCOUNT OF S HRI M.H. ANDURE. ON PAGE NO. 4(OL), 5(OL) & ON PAGE 23 OF DIARY NO. A-67, THERE ARE OTHER NOTINGS IN RESPECT OF RENT OF THE SHOPS. TH IS ACCORDING TO HIM SHOWS THAT THOUGH THE PERIODICAL RENT OF SHOPS FROM TIME-TO-TIME IS RECEIVED BY SHRI M.H. ANDURE, IT IS ADDED AS THE AD VANCES MADE TO HIM BY THE ASSESSEE IN THE SAID DIARIES AND ACCORDINGLY THE AMOUNTS OF SUCH PERIODICAL RENT RECEIVED FOR ALL THE FOUR SHOPS ARE ADDED TO THE AMOUNT OUTSTANDING IN THE ACCOUNT OF SHRI M.H. ANDURE. T HEREFORE, HE 68 CONSIDERED THE COST OF SHOPS AMOUNTING TO RS.5,00,0 00/- AS PER ENTRY ON PAGE NO. 7(OL) OF DIARY A-68 AS THE UN-DISCLOSED IN VESTMENT OF THE ASSESSEE ON SUBSTANTIVE BASIS.' 19.3 THE ASSESSING OFFICER FURTHER NOTED THAT SHRI M.H. ANDURE HAD ADMITTED THE INVESTMENT OF RS. 1,31,280/- IN SHOP N O. 101 AS HIS UN- DISCLOSED INCOME DURING BLOCK ASSESSMENT PROCEEDING S IN HIS CASE. HE, THEREFORE, SEPARATELY TAXED THE SAME IN THE HANDS O F SHRI M.H. ANDURE ON PROTECTIVE BASIS. SIMILARLY, HE ADDED THE IN VESTMENT OF RS.1,43,200/- IN SHOP NO. 111 AS ADMITTED BY SHRI P RASHANT MAHAJAN AS HIS UN-DISCLOSED INCOME DURING BLOCK ASSESSMENT PRO CEEDINGS IN HIS CASE ON PROTECTIVE BASIS. 19.4 BEFORE THE CIT(A) IT WAS ARGUED THAT IN SEIZED DIARY A-68 PAGE 7(OL) THE ASSESSEE, ON INSTRUCTION FROM HIS RELATIV E SHRI M.H. ANDURE, HAS DEDUCTED RS.5 LAKHS FROM HIS RUNNING AC COUNT. AGAINST THE SAID ENTRY NARRATION IN WORD SHOP WAS WRITTEN . MR. M.H. ANDURE HAS ACCEPTED IN HIS STATEMENT RECORDED U/S.132(4) OF INCOME TAX ACT THAT HE HAS OWNED SHOP NO. 101 AT APNA BAZA R, BUT HE HAS NEITHER DISCLOSED INVESTMENT IN THE SAID SHOP IN HI S INCOME TAX RETURN NOR OFFERED THE RENTAL INCOME EARNED THEREON. HE HAS OFFERED ACTUAL INVESTMENT OF RS.1,31,280/- AS WELL AS RENTAL INCOM E EARNED AS HIS UNDISCLOSED INCOME WHILE FILLING THE BLOCK RETURN. IT WAS POINTED OUT THAT THE OTHER 3 SHOPS AT APNA BAZAR, BEARING NO. 102, 1 11, & 112 ARE OWNED BY SHRI. P.B. MAHAJAN WHO HAS DISCLOSED 2 SHO PS BEARING NO. 102 & 112 IN HIS REGULAR RETURN FILED PRIOR TO THE SEAR CH. THE INVESTMENT IN SHOP NO. 111 WHICH WAS REMAINED TO BE DISCLOSED WAS OFFERED FOR TAX IN 69 HIS BLOCK RETURN ALONGWITH RENTAL INCOME EARNED THE REON. IT WAS ARGUED THAT ON VERIFICATION OF PURCHASE/ LEASE DEED S OF THE AFORESAID SHOPS IT IS CRYSTAL CLEAR THAT SAID SHOPS ARE OWNED BY MR. M.H. ANDURE AND MR. P.B. MAHAJAN RESPECTIVELY. THE RESPECTIVE O WNERS ARE ALSO PAYING LEASE RENT TO THE CATHOLIC CHURCH FROM TIME TO TIME. ALL OTHER INCIDENTAL EXPENSES I.E. PROPERTY TAX, LIGHT BILL E TC. ARE BORNE BY THE RESPECTIVE OWNERS. 19.5 IT WAS ARGUED THAT INVESTMENTS MADE IN SHOP NO . 101 BY MR. M.H. ANDURE AT RS. 1,31,280/- & SHOP NO. ILL BY MR. P.B. MAHAJAN AT RS.1,43,200/- HAS BEEN TAXED IN THEIR RESPECTIVE HA NDS ON PROTECTIVE BASIS, WHEREAS RENTAL INCOME EARNED AND OFFERED FOR TAX IN THEIR RESPECTIVE BLOCK RETURNS HAS BEEN RETAINED ON SUBST ANTIVE BASIS. IT WAS ARGUED THAT THERE IS NO BASIS OR MATERIAL ON RECORD WHICH REVEALS THAT INVESTMENT IN THE SHOPS BELONG TO THE ASSESSEE. THE ASSESSING OFFICER HAS PRESUMED AND ADDED RS. 5.00 LACS TO THE UNDISCL OSED INCOME OF THE ASSESSEE WHICH NEEDS TO BE DELETED IN TOTO. 19.6 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO AN D CONFRONTED THE SAME TO THE ASSESSEE. AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE AO AND THE REJOINDER OF THE ASSESSEE TO THE SAME THE LD.CIT(A) DELETED THE ADDITION BY OBSERVED AS UNDER : 8.7 AFTER CONSIDERING THE FACTS OF THE CASE, THE ARGUMENTS OF THE LD. AR AND THE REPORTS OF THE AO, I FIND THAT THIS ADDITION I S ALSO NOT SUSTAINABLE FOR SIMILAR REASONS ALREADY DISCUSSED AT GROUND N O.6. PERUSAL OF THE RECORDS SHOWS THAT THERE WERE TOTAL FOUR SHOP S WHICH WERE TAKEN ON LONG TERM LEASE BY SHRI M.H. ANDURE AND SH RI PRASHANT MAHAJAN FROM THE ROMAN CATHOLIC CHURCH, AURANGABAD, COPIES OF WHICH 70 WERE PRODUCED BEFORE ME. THE ASSESSING OFFICER HAS HELD THAT THE ENTRY OF RS. 5 LACS APPEARING AS DEDUCTION IN THE RUNNING AC COUNT OF SHRI ANDURE IN DIARY A-68 IS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THIS CONCLUSION IS PURELY BASED ON THE SO CALLED EN TRY IN THE SAID DIARY WITHOUT TAKING INTO CONSIDERATION THE STATEMENT OF THE ASSESSEE, AND SHRI ANDURE AND THE COPIES OF THE LEASE AGREEMENT P RODUCED BEFORE HIM. I DO NOT FIND ANY EVIDENCE IN THE SAID DIARY A -68 WHICH SUGGESTS THAT THE ASSESSEE HAD MADE ANY INVESTMENT IN THE SHOP TH ROUGH SHRI ANDURE. 8.8 IT IS PERTINENT TO MENTION HERE THAT SHRI ANDUR E HAS OFFERED RS. RENTAL INCOME OF RS. 1.20 LACS IN THE BLOCK PERIOD IN HIS BLOCK RETURN. IT IS ALSO OBSERVED THAT SHRI PRASHANT MAHAJAN OWNED THRE E SHOPS LEASED BY THE SAID CHURCH OF WHICH TWO SHOPS WERE DISCLOSED I N HIS BOOKS OF ACCOUNT AND THE THIRD SHOP NO.LLL WAS ADMITTED AS UNEXP LAINED INVESTMENT IN THE STATEMENT RECORDED U/S 132(4) (Q.NO. 28). ACCORDINGLY SHRI PRASHANT MAHAJAN HAD OFFERED UNEXPLAINED INVESTMENT IN SHOP NO.111 AT RS. 1.30 LACS AND RENTAL INCOME O F RS.1.72 LACS IN HIS BLOCK RETURN. THE ASSESSING OFFICER HAS ASSESSED THE UNEXPLAIN ED INVESTMENT IN THESE SHOPS IN THE HANDS OF SHRI ANDU RE AND SHRI P.B.MAHAJAN AS THEIR UDI ON PROTECTIVE BASIS. WHI LE AT THE SAME TIME, THE RENTAL INCOME EARNED FROM THESE VERY SHOPS WAS TREATED AS UDI IN THE HANDS OF SHRI M.HL ANDURE AND SHRI P.B. MAHAJAN ON SUBSTANTIVE BASIS. THE SAID STAND TAKEN BY THE AO, NEGATES THIS FINDING IN TAXING THE UNEXPLAINED INVESTMENTS IN SHOP IN THE HANDS OF THE ASSESSEE. CONSIDERING THESE FACTS AND CIRCUMSTANCES, AND EVID ENCES AVAILABLE ON RECORD IN THE FORM OF LEASE DEED, I HAVE NO HESITATI ON TO HOLD THAT THE ASSESSEE HAD NO NEXUS WITH THE SO CALLED INVESTMENT IN TH E SHOP APPEARING IN THE RUNNING ACCOUNT OF SHRI ANDURE IN DIARY NO. A-68. ACCORDINGLY THE ADDITION OF RS. 5 LACS TOWARDS SUC H INVESTMENT IN THE HANDS OF THE ASSESSEE IS HEREBY DELETED. HOWEVER, I MAY ADD HERE THAT SHRI M.H.ANDURE IN HIS STATEMENT HAS OWNED UP THE TRANSA CTIONS APPEARING IN HIS NAME IN DIARY NO. A-68, WHEREAS HE HAS DISCLOSE D RS.1,31,280/- AS HIS UNEXPLAINED INVESTMENT IN THE SHOP. THUS, THE DISCL OSURE MADE BY SHRI ANDURE IS SHORT OF THE ACTUAL INVESTMENT IN THE SAID SHOP AS APPEARING IN THE RUNNING ACCOUNT IN THE SAID DIARY. A CCORDINGLY THE SHORT DISCLOSURE OF UNEXPLAINED INVESTMENT IN THE SHOP OF R S.3,68,720/- SHALL BE ADDED TO THE TOTAL UNEXPLAINED INVESTMENT ALREADY OF FERED IN THE BLOCK RETURN TO BE TAXED ON SUBSTANTIVE BASIS, WHIL E DISPOSING OF THE APPEAL OF SHRI M.H.ANDURE. 19.7 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 20. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE AO MADE ADDITION OF RS.5 LAKHS ON ACCOUNT OF THE INVESTMENT IN SHOPS AT APNA BAZAR ON THE BASIS OF CERTAIN ENTRIES FOUND IN THE DIARY A-68 SEIZED FROM THE RESIDENCE OF THE ASSESSEE. THE ADDITION WAS ON THE BASIS OF RS. 5 71 LAKHS DEDUCTED FROM THE RUNNING ACCOUNT OF SHRI M. H. ANDURE TOWARDS INVESTMENT IN SHOPS AT APNA BAZAR. WE FIND THE LD. CIT(A) WHILE DELETING THE ADDITION HAS STATED THAT 4 SHOPS WERE TAKEN ON LONG TERM LEASE BY SHRI M.H. ANDURE AND SHRI P. MAHAJAN FROM THE ROMAN CATHOLIC CHURCH. SHRI M.H. ANDURE HAS OFFERED RENT AL INCOME OF RS.1.20 LAKHS IN THE BLOCK PERIOD. SIMILARLY, SHRI P.B. MAHAJAN HAS DECALRED 2 SHOPS PRIOR TO THE SEARCH AND ONE SHOP W HICH WAS NOT DISCLOSED WAS DECLARED AS HIS UNEXPLAINED INVESTMEN T IN HIS STATEMENT U/S.132(4). THUS, SRI P.B. MAHAJAN HAS OFFERED UNE XPLAINED INVESTMENT OF RS.1.30 LAKHS ON ACCOUNT OF INVESTMENT IN SHOP A ND RENTAL INCOME OF RS.1.72 LAKHS IN HIS BLOCK RTURN. WHILE THE INVEST MENT IN THE SHOPS HAVE BEEN TREATED AS UNDISCLOSED INVESTMENT IN THE HANDS OF THE ASSESSEE WE FIND THE AO HAS TREATED THE RENTAL INCOME AS THE INCOME OF THE RESPECTIVE PERSONS IN WHOSE NAMES THE SHOPS STAND. THUS, THE AO HAS CONTRADICTED HIMSELF. SINCE THE RENTAL INCOME HAS BEEN TREATED AS INCOME OF THE RESPECTIVE OWNERS BY THE AO AND WHEN THE CONCERNED PERSONS HAVE OWNED UP THE PROPERTIES IN THEIR HANDS AND WHEN THE DIARIES DO NOT REVEAL THAT THE ASSESSEE HAS PAID FO R THE ABOVE ASSETS, THEREFORE, WE DO NOT FIND ANY REASON WHY THE SAME S HOULD BE ADDED IN THE HANDS OF THE ASSESSEE. IN THIS VIEW OF THE MAT TER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ON THIS I SSUE WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UP HELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 21. IN GROUND OF APPEAL NO.27 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE AMOUNT OF RS.24,40,20 0/- ADDED BY THE 72 ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXPENDI TURE INCURRED THROUGH RUNNING ACCOUNTS. 21.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO M ADE ADDITION OF RS.24,92,200/- BEING UNEXPLAINED EXPENDITURE THROUG H RUNNING ACCOUNTS AS PER ANNEXURE-2 TO THE ASSESSMENT ORDER. WHILE DOING SO, HE HELD THAT THESE EXPENSES HAVE BEEN DEDUCTED FROM THE RUNNING ACCOUNT OF DIFFERENT PERSONS APPEARING IN THE DIARI ES A-67, A-68 AND A-71 WHICH CLEARLY SHOW THAT THESE EXPENSES BELONG TO THE ASSESSEE. HE ACCORDINGLY HELD THAT THESE EXPENSES ARE UNDISCL OSED INCOME OF THE ASSESSEE. 21.2 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE AS SESSEE HAS WRITTEN THE DIARIES FOR AND ON BEHALF OF HIS RELATI VES SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN AND HIS FRIEND SHRI M.B. PATI L AND FROM THE RUNNING ACCOUNT OF THE SAID PERSONS THEIR INVESTMEN TS AND OTHER PERSONAL EXPENSES WERE ALSO DEDUCTED BY THE ASSESSE E ON INSTRUCTIONS OF RESPECTIVE PERSONS. IT WAS SUBMITTED THAT THE R UNNING ACCOUNT OF SHRI M.B. PATIL SHOWS EXPENSES LIKE RS. 2 LAKHS ON ACCOUNT OF DIWALI DISTRIBUTION, RS.35 LAKHS FOR NAGAR CLOTHS, RS. 1,1 5,000/- FOR MUMBAI, RS..36 LAKHS FOR NAGPUR. IT WAS ARGUED THA T SINCE THE ASSESSEE IS A GOVT. OFFICER AND GOVERNMENT SERVANTS DO NOT DISTRIBUTE GIFTS FOR DIWALI FESTIVAL BUT THEY MAY RECEIVE GIFT S, THEREFORE, THESE ARE NOT ASSESSEES EXPENSES BUT THESE ARE THE EXPEN SES OF SHRI M.B. PATIL AND OTHERS. IT WAS ARGUED THAT ALL THESE TRA NSACTIONS APPEARING IN THE RUNNING ACCOUNT OF SHRI M.B. PATIL ARE EITHER H IS BUSINESS OR PERSONAL EXPENSES AND THE ASSESSEE IS NOT CONCERNED WITH THE SAME. 73 21.3 IT WAS ARGUED THAT THE AO HAS ALSO EXTRACTED S OME FIGURES FROM RUNNING ACCOUNT OF SHRI M.H.ANDURE AND ADDED THE SA ME TO THE UNDISCLOSED INCOME OF THE ASSESSEE. HOWEVER, THE S AME HAS BEEN CONSIDERED BY SHRI M.H. ANDURE WHILE FILING HIS BLO CK RETURN. SIMILARLY, THE VARIOUS OTHER EXPENSES MENTIONED IN THE DIARIES BELONG TO THE RESPECTIVE PERSONS AND THEY DO NOT BELONG TO THE ASSESSEE. IT WAS SUBMITTED THAT THE AO ONLY PRESUMES THAT THESE EXPENSES ARE INCURRED BY THE ASSESSEE BUT THERE IS NO SUCH PROOF . 21.4 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE REMAND REPORT SO OBTAINED FROM THE AO WAS CONFRONTED TO TH E ASSESSEE. AFTER CONSIDERING THE REMAND REPORT, THE SUBMISSIONS OF T HE ASSESSEE AND HIS REJOINDER TO THE REMAND REPORT THE LD.CIT(A) SU STAINED AN AMOUNT OF RS.52,000/- AND DELETED THE AMOUNT OF RS.24,40,2 00/- BY OBSERVING AS UNDER : 9.9 AFTER CONSIDERING THE FACTS OF THE CASE, THE ARGU MENTS OF THE LEARNED AUTHORISED REPRESENTATIVE AND THE REPORTS OF THE AO, I FIND THAT AGAIN THE AO HAS MADE THESE ADDITIONS CONSIDERING T HE FACT THAT TRANSACTIONS RECORDED IN THE DIARIES PERTAIN TO THE A SSESSEE. AS MENTIONED ABOVE AND THE FINDING GIVEN FOR GROUND NO S. L & 2, THE ENTIRE TRANSACTIONS ARE RELATED TO SHRI M.B.PATIL, SHRI M.H. ANDURE OR SHRI P.B. MAHAJAN. THEREFORE, THERE IS NO REASON FOR CONSIDERI NG THESE INVESTMENTS / EXPENDITURE AS UNEXPLAINED INCOME IN THE HANDS OF T HE ASSESSEE. FURTHER, MR. ANDURE HAS ALREADY CONSIDERED THESE EX PENDITURE IN HIS CASH FLOW STATEMENT OFFERING UDI BY HIM. SIMILARLY, UNEXP LAINED EXPENDITURE / INVESTMENT IN M.B. PATIL'S ACCOUNT IS SUB-JUDICE B EFORE THE SETTLEMENT COMMISSION. IT IS ALSO PERTINENT TO NOTE THAT MR.M .H.ANDURE & MR. M.B.PATIL HAVE OWNED UP THE TRANSACTIONS RECORDED I N THE DIARIES A-67.A- 68 AND A-71. FURTHER IN THEIR STATEMENTS RECORDED U/S. 131 BOTH MR. M.H ANDURE AND MR. M.B.PATIL HAS ACCEPTED THAT WHATE VER EXPENSES ARE DEDUCTED FROM THEIR RUNNING ACCOUNT APPEARING IN DI ARIES A-67,A-68 AND A-71 ARE EITHER THEIR BUSINESS EXPENSES OR PERSONAL EXPENSES AND HAVE ALSO ADMITTED THAT DEDUCTIONS MADE FROM RUNNING ACCOUNT APPEARING IN THE SAID DIARIES ON ACCOUNT OF INVESTME NTS MADE ARE REGARDING THEIR OWN INVESTMENTS AND THE ASSESSEE IS NOT C ONCERNED WITH THESE INVESTMENTS. HERE REFERENCE IS MADE TO THE STATEME NT OF THE ASSESSEE U/S. 132(4) DT. 21-11-200L AT QUE. NO. 36, S TATEMENT OF SHRI M.H. ANDURE U/S. 131 DT. 2-1-2002 AT QUE. NO.41 I H AVE PERSONALLY 74 EXAMINED THE NATURE OF THE EXPENSES WHICH HAVE BEEN INCURRED AND DEDUCTED OUT OF RUNNING ACCOUNT OF SHRI MB. PATIL AND SHRI M.H. ANDURE IN THE DIARY NO. A-67, 68 & 7 AND DO NOT FIND ANY EXPE NSE THAT COULD HAVE BEEN ACTUALLY INCURRED OR CONNECTED TO THE ASSESSEE EXC EPT FOR EXPENSES TOWARDS KESARI TOUR OF RS.52,000/- INCURRED ON HIS NEP AL TOUR. THERE ARE INDEPENDENT EVIDENCE PROCURED BY THE AO IN THE FORM OF LETTER FROM KESARI TOUR CONFIRMING THAT THE EXPENSES HAVE BEEN INCURRED TOWARDS TRAVEL EXPENSE OF SHRI N.H. JALKOTE ON HIS TOUR TO NEPAL. THEREFORE, OTHER THAN THE SAID EXCEPTION THERE IS NO EVIDENCE WHICH C OULD PROVE THAT THE EXPENSES MENTIONED IN THE RUNNING ACCOUNT ACTUALLY PERTAINED TO THE ASSESSEE. IN VIEW OF ABOVE DISCUSSION AND FINDING GIVEN ON THE GROUNDS NOS.L AND 2 OF THIS ORDER, THERE IS NO REASON FOR CONSIDERING T HESE EXPENDITURE / INVESTMENT AS UNEXPLAINED IN THE HANDS O F THE ASSESSEE EXCEPT FOR RS.52,000/- HAVING BEEN INCURRED BY THE ASSESSEE. ACCORDINGLY THE UNACCOUNTED EXPENSES OF RS.52,000/- INCURRED BY TH E ASSESSEE IS HELD TO BE HIS UDI AND HENCE CONFIRMED. 9.10 IT IS PERTINENT TO MENTION ALSO THAT SHRI M.H. A NDURE THOUGH HAVING ADMITTED THAT THE SAID EXPENSES HAVE BEEN INCU RRED BY HIM IN HIS STATEMENT HAS NOT OFFERED THE SAME AS HIS UNEXPLAIN ED EXPENSES IN HIS BLOCK RETURN. THE ASSESSEE HAS ALSO NOT BEEN AB LE TO PRODUCE ANY EVIDENCE EITHER BEFORE THE AO OR BEFORE ME TO SHOW THAT THE SAID EXPENSES STANDS REFLECTED IN THE REGULAR BOOKS OF ACCOUNT OR TH E KNOWN SOURCE OF SUCH EXPENDITURE. THEREFORE, THERE IS NO DOUBT THAT T HE EXPENSES OF RS. 4,00,500 APPEARING IN THE RUNNING ACCOUNT OF SHRI M .H. ANDURE ARE UNEXPLAINED AND, THEREFORE, NEEDED TO BE TAXED AS UN DISCLOSED INCOME IN HIS HANDS ON SUBSTANTIVE BASIS. THUS, THE TOTAL UNACCO UNTED EXPENSES AS UDI IS CONFIRMED AT RS.52,000/- IN THE HANDS OF THE ASSESSEE AND THE BALANCE AMOUNT OF RS.24,40,200/- IS HEREBY DELETED IN THE HANDS OF THE ASSESSEE. HOWEVER, THE SUM OF RS.4,00,500/- SHALL BE CONSID ERED AS UNEXPLAINED EXPENDITURE IN THE HANDS OF SHRI M.H. A NDURE AND THE REMAINING AMOUNT OF RS.20,39,700/-[RS. 20,91,700 (-) 52000] SHALL BE THE SUBJECT MATTER OF UNEXPLAINED EXPENDITURE IN THE HANDS OF SHRI M.B. PATIL IN THE PETITION SUB JUDICE BEFORE THE SETTLEME NT COMMISSION. IN THE RESULT, THE APPEAL ON GROUND NO. 8 IS PARTLY ALLOWE D. 21.5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE AO MADE ADDITION OF 24,92,200/- ON THE GROUND THAT THE TRAN SACTIONS RECORDED IN THE DIARY ARE HIS UNEXPLAINED EXPENDITURE THROUGH T HE RUNNING ACCOUNT. WE FIND THE LD.CIT(A) DELETED THE ADDITION ON THE G ROUND THAT THE ENTIRE TRANSACTIONS ARE RELATED TO SHRI M.B. PATIL, SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN AND THERE IS NO REASON FOR CONSID ERING THAT THESE 75 INVESTMENTS/EXPENDITURE AS UNEXPLAINED INCOME IN TH E HANDS OF THE ASSESSEE. HE HAS GIVEN A FINDING THAT THE SAID EX PENSES AS PER ANNEXURE-2 WHICH IS THE SUBJEVT MATTER OF ADDITION HAS BEEN CONSIDERED BY SHRI M.H. ANDURE AND SHRI P.B. MAHAJAN AND SHRI M.B. PATIL IN THEIR RESPECTIVE HANDS AND IN THEIR RESPECTIVE CASH FLOWS. AFTER CONSIDERING THE NATURE OF EXPENSES, THE LD.CIT(A) H AS SUSTAINED AN AMOUNT OF RS.4,00,500/- AS UNEXPLAINED EXPENDITURE IN THE HANDS OF SHRI M.H. ANDURE AND AN AMOUNT OF RS.20,39,700/- I N THE HANDS OF SHRI M.B. PATIL. NOTHING CONTRARY WAS BROUGHT TO O UR NOTICE AGAINST THE FACTUAL FINDING OF THE LD.CIT(A) ON THIS ISSUE. FU RTHER, SRI N.H, JALKOTE IN HIS STATEMENT RECORDED U/S.132(4) IN HIS REPLY T O QUESTION NO.36 HAS CATEGORICALLY STATED THAT HE HAS NOT MADE THE PAYME NT FOR MOBILE BILL OF SHRI M.H. ANDURE. IN THIS VIEW OF THE MATTER AND I N VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ON THIS I SSUE, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UP HELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 23. IN GROUND OF APPEAL NO.28 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.22,82, 700/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADVANCE TO SHRI GAN GADHAR MAHAJAN. 23.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ACCOUNT OF SHRI GANGADHAR MAHAJAN APPEARS ON PAGE NO.5 OF A-68 SEIZ ED FROM THE RESIDENCE OF THE ASSESSEE. THE SAME ACCOUNTS APPEA RS ON PAGE NO.12 OF DIARY A-71 AND AGAIN ON PAGE 12 OF DIARY A-67. THE SAME ENTRIES ARE REPEATED AT THREE PLACES. THIS ACCOUNT SHOWS THE O PENING BALANCE OF RS.23.02 LAKHS AS ON 29-01-97 AND CLOSING BALANCE O F RS.22,82,700/- AS 76 ON 27-07-97 OUTSTANDING TILL THE DATE OF SEARCH. T HE ACCOUNT ON PAGE 5 OF A-68 AND ON PAGE 12 OF A-71 IS SIGNED BY SHRI GA NGADHAR MAHAJAN AS WELL AS SHRI M.H. ANDURE. THERE IS AN UNDERTAKI NG FOR THE REPAYMENT OF RS.23,00,000/- APPEARING ON PAGE NO.13 (OL) OF A-71 SIGNED BY SHRI GANGADHAR MAHAJAN AND SHRI M.H. ANDU RE ON 24-10-98. IN VIEW OF HIS SIGNATURE APPEARING THERE, SHRI M.H. ANDURE SURRENDERED THE AMOUNT OF RS.23,02,000/- AS HIS UNDISCLOSED INC OME IN THE ANSWER TO QUESTION NO.56 AND 63 OF HIS STATEMENT RECORDED U/S.132(4). HOWEVER, DURING THE BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI M.H. ANDURE, HE REVISED THE FIGURE OF RS.22,02,700/ - BEING THE CLOSING BALANCE ON THE ACCOUNT OF SHRI GANGADHAR MAHAJAN. 23.2 AFTER REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.22,82,700/- I N THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS ON ACCOUNT OF ADVANCE TO SHRI GANGADHAR MAHAJAN TREATING THE SAME AS UNDISCLOSED INCOME. H E, HOWEVER, SEPARATELY TAXED THE SAME IN THE HANDS OF SHRI M.H. ANDURE ON PROTECTIVE BASIS. 23.3 IN APPEAL THE LD.CIT(A) DELETED THE ADDITION M ADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER : (E) THERE IS ALSO ONE TRANSACTION REGARDING THE AD VANCES GIVEN BY SHRI M.H.ANDURE TO ONE SHRI G.MAHAJAN FOR RS.22.82 LAKHS. IF WE ACCEPT THE THEORY OF THE AO, THE LOAN MUST HAVE BEEN GIVEN BY T HE ASSESSEE TO SHRI G.MAHAJAN THEN WHY THIS TRANSACTION WAS ENTERED IN MR. ANDURE'S ACCOUNT ONLY AND SIGNED BY BOTH THE PARTIES I.E SHRI ANDURE AND MAHAJAN. FURTHER SHRI M.H. ANDURE HAS ADMITTED THIS T RANSACTION AS HIS UDI IN HIS BLOCK RETURN. 3.123 THE ASSESSING OFFICER HAD MADE ADDITION OF RS.43,0 7,500/- IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF CLOSING BALANCE I N THE RUNNING ACCOUNT OF SHRI M.H. ANDURE APPEARING IN THE DIARY A-68 HELD TO BE THAT OF THE ASSESSEE. FURTHER THE BALANCE OF RS.22,82,700/- IN THE RUNNING ACCOUNT OF SRI GANGADHAR MAHAJAN APPEARING IN DIARY A-68 HAS ALSO 77 BEEN TAXED IN THE HANDS OF THE ASSESSEE AND LASTLY THE RU NNING ACCOUNT BALANCES IN THE NAME OF SHRI RENU MAHAJAN AND SHRI S ANJAY MAHAJAN OF RS.1 LAC EACH APPEARING IN DIARY A-71 HAS ALSO BEEN HE LD AS UDI IN THE HANDS OF THE ASSESSEE. ALL THESE RUNNING ACCOUNT BALANCES TOTALING TO RS.67,90,200/- (RS 43,07,500/- + RS.22,82,700/-) ADDED BY THE AO IN THE HANDS OF THE ASSESSEE IS HEREBY DIRECTED TO BE DELET ED ON ACCOUNT OF SPECIFIC REASONS MENTIONED IN THE PRECEDING PARAS OF T HIS ORDER. HOWEVER, CONSIDERING THE FACT THAT THE TOTAL BALANCE OF RUNNING ACCOUNT AMOUNTING TO RS.67,90,200/- HAVE NOT BEEN EXPLAINED IN THE HANDS OF SHRI M.H.ANDURE AND HIS ASSOCIATES, IT IS HELD TO BE UDI OF SHRI M.H. ANDURE. APPROPRIATE DECISION SHALL BE TAKEN IN THE RE LEVANT GROUNDS OF APPEAL OF SHRI M.H. ANDURE TO TAX THE AFORESAID UNDI SCLOSED INCOME OF RS.67,90,200/- ON SUBSTANTIVE BASIS, AFTER DUE CONSIDERAT ION TO THE SUBMISSIONS OF THE SAID PARTY. 23.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE ASSESSING OFFICER MADE ADDITION OF RS.22,82,700/- ON THE GROU ND THAT THE DIARY SEIZED FROM THE RESIDENCE OF THE ASSESSEE CONTAINS ACCOUNT OF SHRI GANGADHAR MAHAJAN WHERE THE CLOSING BALANCE WAS SHO WN AT RS.22,82,700/-. ALTHOUGH SRI M.H. ANDURE SURRENDER ED THE SAME STATING THAT THE SAME HAS BEEN GIVEN BY HIM TO SHRI GANGADHAR MAHAJAN AND EVEN THOUGH IN HIS STATEMENT RECORDED U/S.131 S RI GANGADHAR MAHAJAN HAS ACCEPTED THAT HE HAS OBTAINED LOAN FROM SHRI M.H. ANDURE, WE FIND THE ASSESSING OFFICER MADE THE ADDI TION IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. EVENTHOUGH S HRI M.H. ANDURE HAS VOLUNTARILY OFFERED RS.15.82 LAKHS TOWARDS UNACCOUN TED ADVANCE GIVEN BY TO SHRI GANGADHAR MAHAJAN IN HIS BLOCK RETURN, W E FIND THE ASSESSING OFFICER MADE THE ADDITION OF RS.22.82 LAK HS ON PROTECTIVE BASIS IN THE HANDS OF SHRI M.H. ANDURE AND ON SUBST ANTIVE BASIS IN THE HANDS OF THE ASSESSEE. WE FIND IN THE INSTANT CASE THE TRANSACTION WAS 78 ENTERED INTO BETWEEN SHRI M.H. ANDURE AND SHRI GA NGADHAR MAHAJAN AND THE SAME HAS BEEN SIGNED BY BOTH OF THEM. FURTH ER, SHRI M.H. ANDURE HAS ADMITTED THIS TRANSACTION AS HIS UNDISCL OSED INCOME. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINI ON THAT THE SAME SHOULD BE CONSIDERED IN THE HANDS OF SHRI M.H.ANDUR E ONLY AND NOT IN THE HANDS OF THE ASSESSEE. IN VIEW OF THIS AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ON THIS ISSUE WE F IND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 25. IN GROUND OF APPEAL NO.29 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.35,72, 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENTS MADE TH ROUGH RUNNING ACCOUNT. 25.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER MADE ADDITION OF RS.35,72,000/- ON ACCOUNT OF INVESTMENT IN PROPERTIES AND SHETI WORK ON THE BASIS OF ENTRIES FOUND IN THE R UNNING ACCOUNT OF SHRI M.H. ANDURE AND SHRI M.B. PATIL TREATING THE S AME AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION HOLDING THAT SUCH TRANSACTIONS REFLECTED IN THE RUNNING ACCOUNT AS APPEARING IN THE SEIZED DIARIES HAVE TO BE HELD AS BELONGING TO SHRI M.H. ANDURE, SHRI P.B. MAHAJAN AN D SHRI M.B. PATIL AND NOT THE ASSESSEE. HE ACCORDINGLY DELETED THE A DDITION FROM THE HANDS OF THE ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 79 26. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE ASSESSING OFFICER MADE ADDITION IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF INVESTMENT IN PROPERTIES AND SHETI WORK TOTALLING TO RS.35,72,000/- ON ACCOUNT OF ENTRIES APPEARING IN THE RUNNING ACCO UNT OF SHRI M.H. ANDURE, SHRI M.B. PATIL TREATING THE SAME AS UNEXPL AINED INVESTMENT IN THE HANDS OF THE ASSESSEE. WE FIND THE LD.CIT(A) D ELETED THE ADDITION ON THE GROUND THAT THE ENTIRE TRANSACTIONS REFLECTE D IN THE RUNNING ACCOUNT AS APPEARING IN THE SEIZED DIARY BELONG TO SHRI M.H. ANDURE, SHRI P.B. MAHAJAN AND SHRI M.B. PATIL. WE HAVE ALR EADY UPHELD THE ABOVE FINDING OF THE LD.CIT(A) WHILE DECIDING GROUN DS OF APPEAL NO.1 TO 22 BY REVENUE AT PARA 10 TO 10.9 OF THIS ORDER. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) DE LETING THE ADDITION. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAIS ED BY THE REVENUE IS DISMISSED. 27. IN GROUND OF APPEAL NO.30 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.2 LAKH MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF CLOSING BALANCE OF RS.1.00 LA KH EACH IN THE RUNNING ACCOUNT IN THE NAME OF SMT. RENU MAHAJAN AN D SHRI SANJAY MAHAJAN. 27.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSING OFFICER MADE ADDITION OF RS.2 LAKHS BEING CLOSING BALANCE OF RS. 1 LAKH EACH IN THE RUNNING ACCOUNT IN THE NAME OF SMT. RENU MAHAJAN AN D SHRI SANJAY MAHAJAN TREATING THE SAME AS UNDISCLOSED INVESTMENT OF THE ASSESSEE FROM HIS UNACCOUNTED INCOME. IN APPEAL THE LD.CIT( A) DELETED THE 80 SAME HOLDING THAT SUCH ADDITION HAS TO BE CONSIDERE D IN THE HANDS OF THE RESPECTIVE PERSONS AND NOT IN THE HANDS OF THE ASSE SSEE. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL B EFORE US. 27.2 WE FIND THE ABOVE AMOUNT OF RS.2 LAKHS IS PART OF THE ADDITION OF RS.9,82,83,984/- MADE BY THE ASSESSING OFFICER WHIC H HAS BEEN DISCUSSED AT PARA 10 TO 10.9 WHILE DECIDING THE GR OUNDS OF APPEAL NOS. 1 TO 22 BY THE REVENUE. WE HAVE ALREADY DECIDED TH E ISSUE AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. THE ORDER OF THE CIT(A) HAS BEEN UPHELD ON THIS ISSUE WHERE HE HAS H ELD THAT THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSE E AND HAS TO BE CONSIDERED AS THE INCOME/INVESTMENT OF THE PERSONS MENTIONED IN THE DIARY WHO HAVE OWNED UP THE TRANSACTIONS AND PAID T AXES THEREON. IN VIEW OF THE DETAILED REASONING GIVEN THEREIN WE UPH OLD THE ORDERS OF THE CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE R EVENUE IS DISMISSED. 28. IN GROUND OF APPEAL NO.31 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.66 LAK HS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CLOSING BALANCE IN THE RUNNING ACCOUNT IN THE NAME OF SHRI P.B. MAHAJAN. 28.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSING OFFICER MADE ADDITION OF RS.64 LAKHS IN RESPECT OF THE BALANCE I N THE RUNNING ACCOUNT APPEARING IN THE NAME OF SHRI PRASHANT MAHAJAN IN D IARY A-67. SIMILARLY, HE ALSO MADE ADDITION OF RS.2 LAKHS TOWA RDS CAR ADVANCE APPEARING IN THE NAME OF SHRI P.B. MAHAJAN. THUS, THE AMOUNT OF RS.66 LAKHS WAS ADDED BY THE ASSESSING OFFICER IN T HE HANDS OF THE 81 ASSESSEE TREATING THE SAME AS UNDISCLOSED INVESTMEN T OF THE ASSESSEE ON SUBSTANTIVE BASIS. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION FROM THE HANDS OF THE ASSESSEE HOLDING THAT SUCH ADDITIO N CAN BE CONSIDERED IN THE HANDS OF SHRI P.B. MAHAJAN WHO HAS OFFERED T HE SAME TO TAX AS UNDISCLOSED INCOME. HE ACCORDINGLY DELETED THE SAM E. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL B EFORE US. 28.2 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D SHRI P.B. MAHAJAN HAS ALREADY OWNED UP THE TRANSACTIONS AND HAS OFFER ED THE SAME TO TAX AS HIS UNDISCLOSED INCOME IN THE BLOCK RETURN FILED BY HIM. FURTHER, THE ADDITION OF RS.66 LAKHS IS ALSO A PART OF ANNEXURE- 1 WHICH GIVES THE DETAILS OF RS.9,82,83,984/-. WE HAVE ALREADY UPHEL D THE ORDER OF THE CIT(A) WHILE DECIDING GROUNDS OF APPEAL NO.1 TO 22 BY THE REVENUE HOLDING THAT THE ABOVE MENTIONED AMOUNT CANNOT BE A DDED IN THE HANDS OF THE ASSESSEE AND HAS TO BE CONSIDERED AS THE INC OME/INVESTMENT OF THE PERSONS MENTIONED IN THE DIARY WHO HAVE OWNED U P THE TRANSACTIONS AND PAID TAXES THEREON. IN THIS VIEW OF THE MATTER WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THE ISSUE DELETING TH E ADDITION. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISS ED. 29. GROUNDS OF APPEAL NO. 32 AND 33 BY THE REVENUE AND GROUND OF APPEAL NO.2 BY THE ASSESSEE RELATE TO PART RELIEF G IVEN BY THE CIT(A) AMOUNTING TO RS.12,50,000/- OUT OF ADDITION OF RS.5 2,58,000/-. THEREFORE, THE ABOVE GROUNDS ARE DECIDED WHILE ADJU DICATING THE APPEAL FILED BY THE ASSESSEE. 82 30. IN GROUNDS OF APPEAL NO.34 THE REVENUE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN DELETING THE SURCHARGE LEVIED ON U NDISCLOSED INCOME. 30.1 AFTER HEARING BOTH SIDES WE FIND THE SEARCH IN THE INSTANT CASE TOOK PLACE ON 21-11-2001. THE SURCHARGE LEVIED BY THE ASSESSING OFFICER ON TAX COMPUTED ON UNDISCLOSED INCOME WAS D ELETED BY LD.CIT(A) BY RELYING ON VARIOUS DECISIONS. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAJIV BHATARA REPORTED IN 310 ITR 105 HAS HELD THAT EVEN IN RESPECT OF SEARCH PRI OR TO IST JUNE, 2002, THE PROVISIONS OF THE FINANCE ACT, 2001 WOULD BE AP PLICABLE AND SURCHARGE WOULD BE LEVIABLE ON TAX PAYABLE U/S.113. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE REVENUE IS ALLOWED. 30.2 IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS THE APPEAL FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.622/PN/2005 (BY ASSESSEE) : 31. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED WHEN HE IGNORED THE FACT THAT THE ASSESSMENT ORDER PASSED BY THE LD. AO IS BAD IN LAW & AB-INITIO AS THE LD. AO HAS WRONGLY EXERCISED PRESUMPTION AND BREACHED THE EXCLUSIVE JURISDICTION OF THE HONBLE SETTLEMENT COMMISSION BY ASSESSING THE TRANSACTIONS UNDER CONSIDERATION OF THE SAID AUTHORITY U/S.245F(2) OF THE INCOME TAX ACT, 1961 IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. THE ASSESSMENT ORDER THUS PASSED BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A) ERRED WHEN HE RETAINED AN ADDITION OF RS.40,08,000/- TO TH E TOTAL UNDISCLOSED INCOME OF THE ASSESSEE TOWARDS COST OF CONSTRUCTION OF OS MANPURA HOUSE EVEN IN THE ABSENCE OF ANY CONTEMPORARY EVIDENC E OF PAYMENT OF SUCH AN AMOUNT OVER AND ABOVE THE ACTUAL PAYMENT OF RS.12,50,000/- AS PER THE PURCHASE DEED. THE ADDITION THUS MADE BY DEL ETED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A) ALSO ERRED IN RETAINING AN ADDITION OF RS.52,000/- AS UNDI SCLOSED INCOME OF THE ASSESSEE PERTAINING TO THE TRAVELLING EXPENSES FOR A TOUR TO NEPAL WITHOUT VERIFYING THE FACTS. THIS ADDITION BE DELETE D. 83 4. SUCH OTHER ORDERS MAY BE PASSED AS DEEMED FIT AND PR OPER. 5. THE APPELLANT CRAVES LEAVE TO ADD FRESH GROUNDS OF APPEAL AND LEAD EVIDENCE. 32. GROUNDS OF APPEAL NO.1, 4 AND 5 BY THE ASSESSEE BEING GENERAL IN NATURE ARE DISMISSED. 33. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND OF APPEAL NO.3 FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE GROUND OF APPEAL NO.3 IS DISMISSED AS NOT PRESSED. 34. GROUND OF APPEAL NO.2 BY THE ASSESSEE AND THE G ROUNDS OF APPEAL NO.31 & 33 BY THE REVENUE RELATE TO PART RELIEF GIV EN BY THE LD.CIT(A) OUT OF ADDITION OF RS.52,58,000/- MADE BY THE ASSES SING OFFICER. 34.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THERE IS DEDUCTION OF EXPENDITURE TOWARDS OSMANPURA HOUSE IN THE RUNNI NG ACCOUNT OF SHRI M.H. ANDURE APPEARING IN THE SEIZED DIARY A-68 AND A-71. THE ASSESSING OFFICER FURTHER NOTED THAT SHRI M.H. ANDU RE IN HIS STATEMENT RECORDED U/S.132(4) VIDE ANSWER TO QUESTION NO.32 H AS ADMITTED THAT THE PLOT NO.6 AT OSMANPURA WAS PURCHASED BY HIM FOR RS.4,75,000/-. SUBSEQUENTLY DURING THE BLOCK ASSESSMENT PROCEEDING S, HE REVISED THE SAME TO RS.2,64,501/- WITHOUT ANY SUPPORTING EVIDEN CE. THE AO NOTED THAT SHRI M.H. ANDURE CONSTRUCTED THE HOUSE ON THIS PLOT AND THE COST OF CONSTRUCTION WAS DECLARED BY HIM AT RS.52,58,000/- AS PER HIS ANSWER TO QUESTION NO. 49 RECORDED U/S 132(4). SUBSEQUENTLY D URING BLOCK ASSESSMENT PROCEEDINGS, THE COST OF CONSTRUCTION OF THIS HOUSE WAS REVISED BY SHRI M.H. ANDURE TO RS.26,76,479/- WITHO UT ANY SUPPORTING EVIDENCE. THIS HOUSE WAS PURCHASED BY THE ASSESSEE FROM SHRI ANDURE 84 FOR RS. 12,50,000/- ALONG WITH THE LAND. SHRI M.H. ANDURE AND THE ASSESSEE BOTH WERE NOT ABLE TO EXPLAIN AS TO WHY TH E HOUSE AT OSMANPURA, WHOSE COST OF CONSTRUCTION WAS RS.52,58, 000/- AS PER THE ENTRIES IN THE SEIZED DIARIES OF THE ASSESSEE AND AS PER THE DECLARATION U/S.132(4) STATEMENT OF SHRI ANDURE TOGETHER WITH T HE LAND OF RS.4,75,000/- AS PER ORIGINAL DECLARATION OF SHRI M .H. ANDURE, WAS SOLD TO THE ASSESSEE FOR RS.12,50,000/-. EVEN AS PER TH E REVISED FIGURES GIVEN BY SHRI M.H. ANDHURE, THE COST OF THIS HOUSE TOGETH ER WITH LAND COMES TO RS.26,76,479/- WHICH IS MUCH MORE THAN THE AMOUN T OF RS.12,50,000/- FOR WHICH THE ASSESSEE HAS SHOWN TO HAVE PURCHASED FROM SHRI M.H. ANDURE. 34.2 THE ASSESSING OFFICER FURTHER NOTED THAT THE L OOSE PAPER FILE MARKED NUMBER A-19 CONTAINING PAGES 1 TO 183 WAS SE IZED FROM THE PREMISES OF THE ASSESSEE WHICH CONTAINS THE PURCHAS E BILLS FOR BUILDING MATERIAL, THE RATE SCHEDULES AND JOTTINGS FOR LABOU R PAYMENTS ON VARIOUS ITEMS CONCERNING THE CONSTRUCTION OF HOUSE, THE BIL LS IN RESPECT OF COLOURING OF THE HOUSE, THE QUOTATIONS AND PAYMENT DETAILS IN RESPECT OF INTERIOR DECORATOR, THE ARCHITECT'S MEASUREMENTS SH EETS AND THE BILL FOR THE WORK DONE BY HIM ETC. HE NOTED FROM SOME OF TH E SEIZED PAPERS ACCORDING TO WHICH PAGES AT NUMBER 51 TO 53 ARE IN RESPECT OF GLASS WORK DONE BY DIAMOND GLASS MAKER AND THE AMOUNT PAI D AND PAYABLE ARE SHOWN THERE. SIMILARLY, THE PAGES AT 93 TO 96 ARE IN RESPECT OF ELECTRICAL WORK DONE BY M/S ELECTRICAL WORKS AND SU PPLIERS SHOWING AMOUNT PAID AND PAYABLE. PAGE NO.97 IS THE BILL DAT ED 27/10/97 OF M/S BEST ART DECORATORS FOR THE TOTAL AMOUNT OF RS.1,17 ,534/- OUT OF WHICH RS. 85,000/- WAS PAID AS ADVANCE. THERE IS ANOTHER BILL DATED 09/03/98 85 OF M/S BEST ART DECORATORS OF RS.2,03,131/- REVISED TO RS. 1,88,871/- AT PAGE NO.49. THE PAGE NO. 88 IS THE BILL FOR COLOUR WORK FOR THE AMOUNT OF RS.2,32,965/- WITH A DIRECTION DATED 22/06/98 TO PAY RS.2,15,000/- AND IT ALSO SHOWS THAT ADVANCE OF RS.1,39,000/- WAS PAID. THE PAGE NO. 27 IS THE LETTER DATED 29/09/97 OF M/S MODULE ARCHI TECT ADDRESSED TO MRS. ARUNA B. PATIL AND MRS. SANGEETA M. PATIL WHO ARE FAMILY MEMBERS OF SHRI M.B. PATIL. IN THIS LETTER M/S. MOD ULE ARCHITECTS HAS RAISED BILL OF RS.27,000/- IN RESPECT OF THE ARCHIT ECTURAL SERVICES GIVEN BY THEM FOR THE RESIDENTIAL BUILDING AT PLOT NO.6, OSMANPURA. 34.3 THE ASSESSING OFFICER ALSO NOTED THAT THE AMOU NT OF RS.2,20,000/- PAID BY CHEQUE WAS ALSO RECEIVED BACK BY MR. M.B. PATIL AS AN ADDITION TO HIS RUNNING ACCOUNT ON PAGE 23 (O L) OF A-67. HE NOTED THAT THE ASSESSEE OBTAINED LOAN OF RS. 4.75 L AC FROM THE BOMBAY MERCANTILE BANK AGAINST THE SECURITY OF FIXED DEPOS ITS OF RS.5,00,000/- MADE BY SHRI. M. B. PATIL IN DIFFERENT NAMES. HE NO TED THAT THE COST OF ARRANGING THE LOAN AMOUNTING TO RS. 25,000/- IS ALS O DEDUCTED FROM THE ACCOUNT OF SHRI. M. B. PATIL ON 12.05.1999. THE ASS ESSING OFFICER NOTED THAT JOTTING OF EXPENSES INCURRED ON CONSTRUCTION O F THIS HOUSE IS FOUND ON PAGE NO. 11, LOOSE PAPER BUNDLE MARKED AS A-73 S EIZED FROM THE ASSESSEE THE AGGREGATE OF WHICH COME TO RS.52,57,93 4/- I.E. RS.52,58,000/-. IN VIEW OF THIS AND CONSIDERING THE FACT THAT ENTRIES ARE APPEARING IN THE ACCOUNT OF SHRI M.H. ANDURE IN THE DIARIES OF THE ASSESSEE HE OBSERVED THAT THE ONLY CONCLUSION THAT CAN BE DRAWN IS THAT THE INVESTMENT OF RS.52,58,000/- IN THE CONSTRUCTIO N OF OSMANPURA HOUSE WAS MADE BY THE ASSESSEE HIMSELF THROUGH THE ACCOUNT OF SHRI M.H. ANDURE. THE AMOUNTS ADVANCED BY THE ASSESSEE T O SHRI M.H. 86 ANDURE IN THE SAID ACCOUNT ARE OUT OF HIS UNDISCLOS ED AND UNEXPLAINED FUNDS. THE AMOUNT OF RS.52,58,000/- HAS ALREADY BE EN DEDUCTED FROM THE ACCOUNT OF SHRI M/H. ANDURE. HENCE, HE TREATED THE INVESTMENT OF RS.52,58,000/- AS THE UNDISCLOSED INCOME OF THE ASS ESSEE ON SUBSTANTIVE BASIS. SINCE, SHRI M.H. ANDURE HAD DECLARED THIS I NVESTMENT IN HIS STATEMENT U/S.132(4),HE SEPARATELY TAXED THE SAME I N THE HANDS OF SHRI M.H. ANDURE ON PROTECTIVE BASIS. 34.4 BEFORE THE CIT(A) THE ASSESSEE MADE TWO FOLD S UBMISSIONS. ACCORDING TO THE FIRST SUBMISSION THE ASSESSEE REFE RRED TO QUESTION NO.19,20,21 AND 29 OF THE STATEMENT RECORDED U/S.13 2(4) OF THE I.T. ACT. OF MR. M.H. ANDURE ACCORDING TO WHICH PLOT NO.6, AT OSMANPURA WAS PURCHASED BY MR. ANDURE, CONSTRUCTION ON THE SAME I S ALSO DONE BY HIM, SOURCE OF INVESTMENT IN PLOT AS WELL AS CONSTR UCTION WAS ALSO OF MR. ANDURE AND SUBSEQUENTLY THE SAID HOUSE WAS SOLD TO THE ASSESSEE. THEREFORE, NO ADDITION IS CALLED FOR IN THE HANDS O F THE ASSESSEE. IN HIS SECOND SUBMISSION THE ASSESSEE MADE ELABORATE ARGUM ENT WHICH READS AS UNDER : 4.4 WHILE MAKING ADDITION OF RS. 52,58,000/- TOWARD S COST OF CONSTRUCTION AT PLOT NO. 6, OSMANPURA, AURANGABAD TH E ASSESSING OFFICER IGNORED THE FACT THAT EXPENSES ON CONSTRUCTI ON OF THE SAID HOUSE WAS ACTUALLY INCURRED BY MR. M. H. ANDURE, CO-BROTHE R OF ASSESSEE. THE SAID PLOT NO.6 WAS OWNED BY MR. ANDURE, SINCE 1997. HE HAD SPENT RS.26,76,479/- TOWARDS CONSTRUCTION OF BUILDING ON TH E SAID PLOT. HE HAS OFFERED THE SAID EXPENSES IN HIS BLOCK RETURN. THE VAL UATION REPORT OF THE SAID BUILDING BY AN APPROVED VALUER MR. PRADEEP KULKARNI WAS ALSO OBTAINED BY MR. M. H. ANDURE. THE VALUATION OF THE HOUSE AS PER REPORT COMES TO RS.16,85,000/-. THIS REPORT ALONGWITH OTHER P APERS OF MR. ANDURE WAS ALSO SEIZED DURING THE COURSE OF SEARCH. BUT THE ASSESSING OFFICER HAS CONVENIENTLY NEGLECTED THIS REPORT, AS THE SAME IS INCONVENIENT TO HIM FOR MAKING UNREALISTIC ADDITION OF RS.52,58,000/-. IF THE ASSESSING OFFICER WANTED TO RELY ON SEIZED MATERIAL REGARDING INVESTMENT IN THIS PROPERTY HE SHOULD HAVE TAKEN INTO CONSIDERATION ALL THE PAPERS FOUND AND NOT THE PAPERS WHICH ARE CONVEN IENT TO HIM. 4.5 AS STATED EARLIER, MR. ANDURE IS ONE OF THE NEAREST RELATIVE OF THE ASSESSEE, HE HAS AGREED TO SELL THE SAID BUILDING TO MRS. R AJASHREE N. 87 JALKOTE, WIFE OF THE ASSESSEE & THE ASSESSEE HIMSELF IN THEI R JOINT NAMES; ON 27.07.2001, THE TOTAL CONSIDERATION OF THE SAID BU ILDING WAS FIXED FOR RS.12,50,000/-. MR. M. H. ANDURE IN HIS STATEMENT RECO RDED U/S 132 (4) HAS CLARIFIED THAT HE HAS SOLD THE SAID BUILDING FOR LO WER CONSIDERATION, BECAUSE HE WAS IN URGENT NEED OF MONEY, FURTHER HE WA S RELATIVE OF THE ASSESSEE AND HAVING STRONG FAITH IN HIM. THE ASSESSEE AND HI S WIFE ARE ASSESSED TO INCOME TAX AND THEY HAVE DEFINITE SOURCES FOR PURCHASE OF THE SAID BUILDING FROM SHRI. M. H. ANDURE FOR RS. 12, 50,000/-. 4.6 THE LEARNED A.R. ALSO POINTED OUT THAT THE LEAR NED ASSESSING OFFICER HAS GROSSLY ERRED AND IGNORED THE SUBMISSION OF THE ASSESSEE AND THEREBY ADDED RS.52,58,000/- IN THE HANDS OF THE ASSESSEE O N SUBSTANTIVE BASIS, BY DOING THIS HE HAS IGNORED THE FOLLOWING GENUINE FAC TS : A. THE OWNERSHIP OF PLOT NO.6, AT OSMANPURA WAS WITH MR.M.H.ANDURE, SINCE OCT., 1997 WHICH IS UNDISPUTEDLY ACCEPTED BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT ORDER OF MR. M. H . ANDURE & HE HAS ALSO ADDED THIS INVESTMENT AS UNDISCLOSED INVESTMEN T IN THE TOTAL UNDISCLOSED INCOME OF THE SAID MR. ANDURE ON SUBSTANTIV E BASIS. B. STATEMENT OF MR. ANDURE, RECORDED U/S 132 (4) O F INCOME TAX ACT, 1961. C. OTHER DOCUMENTS RELATING TO CONSTRUCTION I.E. BUI LDING CONSTRUCTION PERMISSION, OCCUPANCY CERTIFICATE, P. R. CARD, ELECTR ICITY BILLS, PROPERTY TAX RECEIPTS, ETC. D. VALUATION REPORT OF THE SAID BUILDING OBTAINED BY MR. ANDURE FROM APPROVED VALUER WHICH WAS ALSO SEIZED DURING THE COURSE OF SEARCH. E. NO OTHER EVIDENCE IS FOUND REGARDING PAYMENT OF ON MONEY OVER AND ABOVE REAL SALE CONSIDERATION OF RS. 12,50,000/. 4.7 THE ASSESSING OFFICER HAS ADDED RS.52,58,000/- ON PRO TECTIVE BASIS IN THE HANDS OF MR. M.H. ANDURE INSTEAD OF ACTUAL COST OF CONSTRUCTION OF RS.26,76,479/- ON SUBSTANTIVE BASIS. THE LEARNED A.R. FURTHER POINTS OUT THAT IT IS INTERESTING TO NOTE HERE THAT THE ASSESSING OFFICER HAS CONSIDERED INVESTMENT IN PLOT NO. 6 AT OSM ANPURA, IN THE HANDS OF MR. M. H. ANDURE ON 'SUBSTANTIVE BASIS' BUT TH E COST OF CONSTRUCTION OF THE SAID HOUSE ON SUCH PLOT IS ADDED IN THE HANDS OF THE ASSESSEE ON SUBSTANTIATIVE BASIS. IT IS AS IF THE ASSESSING OFF ICER IS IMAGINING THAT THE ASSESSEE HAS CONSTRUCTED THE SAID HOUSE WITHOUT OBTAINING THE TILE OF THE LAND. THIS ITSELF SHOWS THAT WHILE FRAMING THE ASSESSMENT ORDER THE ASSESSING OFFICER WAS HIMSELF CONFUSED AN D IN CONFUSED STATE OF MIND HE HAS SEPARATELY ASSESSED THE PLOT OF LAND AND THE CONSTRUCTION COST OF THE HOUSE IN DIFFERENT HANDS. THEREFORE, ABOVE ADDITION OF RS.52,58,000/- TOWARDS COST OF CONSTRUCTIO N OF OSMANPURA HOUSE IN THE HANDS OF ASSESSEE IS NOT JUSTIFIED AND DESERVES DELETION. 34.5 BASED ON THE SUBMISSIONS ADVANCED BY THE ASSES SEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSES SING OFFICER. THE ASSESSING OFFICER SUBMITTED 2 REMAND REPORTS. IN H IS FIRST REMAND REPORT THE ASSESSING OFFICER REITERATED HIS FINDING IN THE ASSESSMENT 88 ORDER. HOWEVER, IN THE SECOND REMAND REPORT THE AS SESSING OFFICER REPORTED AS UNDER : IT WOULD BE SEEN THAT THE ASSESSEE HAS RELIED UPON VALU ATION REPORT WHEREAS THE ADDITION HAS BEEN MADE ON THE BASIS OF CLIN CHING EVIDENCE IN THE FORM OF RELEVANT NOTINGS AS PER SEIZED DIARIES N O.A-68 AND A-71, PAGE 16 OF A-72 & LOOSE PAPER FILE MARKED NO.A-19 CO NTAIN LARGE NUMBER OF PAPERS FROM NO.1 TO 183 SEIZED FOR THE RESID ENCE OF THE ASSESSEE WHICH POINT OUT DETAILS OF EXPENSES. THE VALUATI ON REPORT FILED UPON BY THE ASSESSEE IS BASED ON ESTIMATION AND NOTHING E LSE. IN VIEW OF THE FACTS DISCUSSED IN PARA 9.6 OF THE BLOCK ASSESSMENT ORDER AND IN VIEW OF THE EVIDENCE FOUND DURING SEARCH, THE FINDIN G GIVEN IN THE ASSESSMENT ORDER IS FULLY RELIED UPON. 34.6 THE ASSESSEE FILED THE REJOINDER ACCORDING TO WHICH THE ASSESSING OFFICER HAS MAINLY RELIED ON FILE MARKED A-19, CONT AINING PAGES 1 TO 183, AND PG.NO. 11 OF LOOSE PAPER BUNDLE FILE A-73. THE BILL FILE MARKED A-19 CONTAINS BILLS PERTAINING TO CONSTRUCTI ON OF OSMANPURA HOUSE. SUM TOTAL OF THE SAID BILLS DOES NOT EXCEED RS.19.00 LACS. THE ASSESSEE HAD ALSO CLARIFIED DURING RECORDING OF STA TEMENT U/S 132 (4) THAT THE OSMANPURA HOUSE WAS CONSTRUCTED BY MR.ANDURE AN D LATER ON SOLD TO HIM. THE SEARCH OPERATIONS WERE ALSO CONDUCTED A T THE RESIDENCE OF SHRI.M.H.ANDURE ON THE SAME DAY. MR.ANDURE HAS ACCE PTED IN HIS STATEMENT RECORDED U/S.132 (4) THAT HE HAD CONSTRUC TED A BUNGALOW ON PLOT 6 AT OSMANPURA AND SOLD THE SAME TO THE ASSESS EE AT LOWER PRICE. THE REASONS ARE STATED BY HIM IN ANSWER TO Q.NO. 64 (PG.NO.30 & 31) OF THE STATEMENT RECORDED U/S 132 (4) OF SHRI.M.H.A NDURE. THE REASONS THUS STATED ARE SELF EXPLANATORY AND FORM PART OF T HE EVIDENCE. 34.7 IT WAS SUBMITTED THAT MR.M.H. ANDURE HAS TAKEN COGNIZANCE OF THE SEIZED PAPER INVENTORIED ANNEXURE A-73, PG.NO.L 1, AT THE TIME OF FILING OF HIS BLOCK RETURN. THE ASSESSING OFFICER H AS NOT OFFERED ANY COMMENTS ON THE FACT THAT THE PLOT NO.6, OSMANPURA, ON WHICH THE SAID 89 BUNGALOW IS CONSTRUCTED, IS NOT ASSESSED IN THE HAN DS OF THE ASSESSEE. ON THE CONTRARY THE SAID PLOT IS ASSESSED AND ADDED TO THE TOTAL UNDISCLOSED INCOME OF MR.M.H. ANDURE ON'SUBSTANTIVE BASIS'. BUT THE ASSESSING OFFICER WHILE ASSESSING THE CONSTRUCTION COST OF THE SAID BUNGALOW, HAS ASSESSED IT ON 'SUBSTANTIVE BASIS' IN THE HANDS OF ASSESSEE AND ON 'PROTECTIVE BASIS' IN THE HANDS OF MR. M. H. ANDURE. THUS THE RESPECTIVE ASSESSMENT ORDERS GIVE A PICTUR E OF ASSUMPTION THAT THE PLOT BELONGS TO ONE PERSON AND THE BUILDIN G TO SOMEBODY ELSE. 34.8 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) GAVE PART RELIEF TO THE ASSESSEE BY SUSTAINING AN A MOUNT OF RS.40.84 LAKHS AS AGAINST RS.52.58 LAKHS ADDED BY THE ASSESS ING OFFICER. THE RELEVANT OBSERVATION OF THE CIT(A) READS AS UNDER : 4.11 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSE E AND THE REMAND REPORT OF THE AO ALONG WITH DOCUMENTS PERTAIN ING TO THIS ISSUE OF INVESTMENT MADE IN THE PROPERTY NAMED 'OSMANPURA' HOUSE, PLOT NO. 6. BEFORE I DEAL WITH THE NATURE OF EVIDENCES AV AILABLE DURING THE COURSE OF SEARCH OPERATIONS AND THE STATEMENT OF THE ASSE SSEE AND SHRI M.H. ANDURE, WHICH HAVE BEEN RELIED UPON BY THE AO IN HIS ORDER, IT IS IMPORTANT TO APPRECIATE THE CHRONOLOGY OF ACQUISITIO N OF SUCH PROPERTY BY THE ASSESSEE. AS PER INFORMATION AVAILABLE ON RECORD , THIS PROPERTY HAS CHANGED HANDS IN QUICK SUCCESSION BEFORE HAVING BEEN TRANSFERRED TO THE ASSESSEE. THE SEQUENCE OF EVENTS IN ACQUISITION OF THIS PROPERTY IS GIVEN IN THE SUCCEEDING PARAS. 4.12 THIS PLOT NO. 6 MEASURING 338 SQMT WAS ORIGINALLY PURCHASED BY MRS. SANGEETA PATIL AND MRS. ARUNA PATIL IN THEIR JOI NT NAMES AT A COST OF RS.2,00,000/- AS PER PURCHASE DEED DT. 17-8-1996. THER EAFTER CONSTRUCTION OF AN HOUSE WITH A BUILT UP AREA OF 2272 .83 SQFT HAD COMMENCED ON THE SAID PLOT AND SUBSTANTIAL CONSTRUCTION EXPENDITURE HAD BEEN INCURRED BY MRS. PATIL WHICH IS EVIDENT FROM THE LETTER OF MODULE ARCHITECTS AND SITE VISIT REPORTS AS SEIZED IN A NNEXURE A-19. THUS, IT IS ESTABLISHED BEYOND ANY DOUBT THAT SUBSTANTIA L CONSTRUCTION HAD BEEN UNDERTAKEN BY MRS. PATIL ON THE SAID PLOT AN D THE EXPENDITURE INCURRED ON THE BASIS OF BILLS AND VOUCHERS IN HER NAME SEIZED AS PER ANNEXURE A-19 AMOUNTS TO RS.9,92,604/-. THEREAFTER TH E SAID PROPERTY WAS SOLD TO SHRI M.H. ANDURE FOR A CONSIDERATION OF RS. 2,21,000/- AS PER REGISTERED VALUE MENTIONED IN THE PURCHASE DEED DT. 1 7-10-1997. HOWEVER, THE VALUE OF THE PROPERTY FOR THE PURPOSE O F STAMP DUTY WAS SHOWN AT RS.4,75,000/-. IT CAN THUS BE OBSERVED THAT MR S. SANGEETA AND ARUNA PATIL HAD SOLD THE PROPERTY ON WHICH CERTAIN C ONSTRUCTION HAD ALREADY TAKEN PLACE TO SHRI M.H. ANDURE AT A CONSIDE RATION FAR BELOW THE 90 COST INCURRED BY THEM. THERE IS NO EXPLANATION AVAILA BLE DURING THE ASSESSMENT PROCEEDINGS NOR ANY CLARIFICATION HAS BEEN SUB MITTED BEFORE ME ON WHY THE SAID PROPERTY WAS SOLD BELOW COST TO SHRI M.H. ANDURE. 4.13 ANOTHER INTERESTING FACT THAT HAS COME TO MY NO TICE THAT SHRI M.H. ANDURE HAD MADE CERTAIN PAYMENTS TO THE ARCHITECT WH O HAD RENDERED SERVICES TOWARDS CONSTRUCTION OF HOUSE ON THE SAID PLOT E VEN PRIOR TO THE DATE OF PURCHASE DEED DT. 17-10-1997. THIS IS EVID ENT FROM THE LETTER OF MODULE ARCHITECT DT. 6-10-2003 SUBMITTED TO THE AO IN RESPONSE TO SUMMONS U/S. 131. THE SAID LETTER CLEARLY SHOW S THAT SHRI M.H. ANDURE HAD MADE SOME PAYMENT OF RS.8,550/- VIDE CHEQUE NO.7122606 DT. 8-7-1997 DRAWN ON DENA BANK, AURANGA BAD. IT IS, THUS, CLEAR THAT SHRI M.H. ANDURE HAD MADE PAYMENT TOWARD S CONSTRUCTION ON THE SAID PROPERTY MUCH PRIOR TO ITS PURCHASE FROM MRS. PATIL. NO EXPLANATION HAS BEEN SUBMITTED BEFORE ME IN THIS REGAR D. EXAMINATION OF THE SEIZED DOCUMENT ANNEXURE A-19 ALSO SHOWS THAT SOM E BILLS HAVE BEEN RAISED TO MR. M.B. PATIL EVEN AFTER THE DATE OF SALE DEED DT. 17-10- 1997. EVEN THIS IS UNEXPLAINED BEFORE ME. CONSIDERING THE FACTS AND CIRCUMSTANCES GIVEN ABOVE, IT IS CLEAR THAT THE SELLER AND THE BUYER HAVE BEEN MAKING PAYMENTS TOWARDS CONSTRUCTION OF HOUSE IN RANDOM DURING THE PERIOD OF TRANSFER OF THE SAID PROPERTY. T HERE REMAINS NO IOTA OF DOUBT THAT THE SALE AND PURCHASE BETWEEN MRS. PATIL AND SHRI M.H. ANDURE AND THE ASSESSEE WAS A COLLUSIVE TRANSACTION W ITH AN HIDDEN ULTERIOR MOTIVE OF FINALLY TRANSFERRING THE SA ID PROPERTY AT A PRICE FAR LOWER THAN THE COST TO THE ASSESSEE. 4.14 DURING THE COURSE OF APPELLATE PROCEEDINGS, I HA D EXAMINED THE DOCUMENTS SEIZED AS PER ANNEXURE A-74 FROM THE RESIDENC E OF THE ASSESSEE. THE DOCUMENTS AT PAGE 2 TO 6 OF THIS ANNEXURE CONTAINS RECEIPTS OF DIFFERENT AMOUNTS PAID BY THE ASSESSEE TO SH RI M.H. ANDURE TOWARDS CONSTRUCTION OF THE OSMANPURA HOUSE. PAGE 6 IS THE RECEIPT OF RS.61,000/-, PAGE 4 IS THE RECEIPT OF RS.96,900/-, PAG E 2 IS THE RECEIPT OF RS.4,75,000/- PAID BY THE ASSESSEE TO SHRI M.H. ANDURE. IT IS SEEN THAT THESE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE, PARTLY BY CHEQUE, DRAFTS AND CASH TO SHRI M.H. ANDURE MUCH PRIOR TO THE DATE OF PURCHASE DEED DT. 27-7-2001. SHRI M.H. ANDURE IN HIS STATEMENT U/S. 132(4) 23- 11-2001 AT QUE. NO. 33 HAS CONFIRMED THAT THE EXPEND ITURE TOWARDS CONSTRUCTION OF THIS HOUSE WAS INCURRED AND PAID BY SHR I N.H. JALKOTE FROM TIME TO TIME. THE PAYMENT TOWARDS CONSTRUCTION O F THE HOUSE BY THE ASSESSEE HAS AGAIN BEEN AFFIRMED BY SHRI M.H. ANDURE IN HIS STATEMENT U/S. 131 DT. 12-12-2001 AT QUE. NO. 67 WHER EIN HE HAS STATED THAT THE DOCUMENTS AT PAGE 2 TO 6 OF ANNEXURE A-74 A RE RECEIPTS ISSUED BY HIM TOWARDS PAYMENTS RECEIVED FROM SHRI N.H. JALKO TE AT THE TIME OF CONSTRUCTION OF THE OSMANPURA HOUSE. THE DOCUMENTARY E VIDENCES SEIZED IN ANNEXURE A-74 COUPLED WITH THE STATEMENT OF SHRI M.H. ANDURE, CLEARLY ESTABLISHES THE DIRECT FINANCIAL INVOL VEMENT OF THE ASSESSEE IN THE CONSTRUCTION OF THE OSMANPURA HOUSE FROM T HE TIME IT WAS PURCHASED BY MRS. PATIL AND THEREAFTER BY SHRI M.H . ANDURE. OBVIOUSLY, IT WAS A COLLUSIVE TRANSACTION BETWEEN MRS. P ATIL, SHRI M.H. ANDURE AND THE ASSESSEE TO GIVE A COLOUR OF A GENUINE TRANSACTION OF PURCHASE OF PLOT IN THE NAME OF MRS. PATIL AND THE CO NSTRUCTION OF HOUSE IN THE NAME OF SHRI M.H. ANDURE. THE AFORESAID SEIZED DOCUMENTS AND STATEMENT ARE CLINCHING EVIDENCES IN PROVING THAT THE ASSESSEE WAS DIRECTLY INVOLVED IN THE PAYMENT OF EXPENDITURE TOW ARDS CONSTRUCTION OF THIS HOUSE AND SHRI M.H. ANDURE WAS A NAME LENDER TO C AMOUFLAGE THE EXPENDITURE ACTUALLY HAVING BEEN INCURRED BY THE ASSE SSEE. SHRI M.H. ANDURE HAS SIMPLY OWNED THE COST OF CONSTRUCTION AS HIS UDI TO PROTECT AND SAVE THE ASSESSEE WHO HAPPENS TO BE HIS CO-BROTHER. 91 4.15 PERUSAL OF THE STATEMENTS OF THE ASSESSEE AND SHRI M. H. ANDURE RECORDED BY THE DEPARTMENT ALSO SHOWS THAT THE ASSESSEE WAS FINANCIALLY INVOLVED IN THE CONSTRUCTION OF THIS HOUSE MUCH PRIOR TO THE DATE OF PURCHASE DEED DT. 27-7-2001. REFERENCE IS MAD E TO THE STATEMENT OF THE ASSESSEE U/S. 132(4) DT. 21-11-2001 AT QUE NO. 16 WHEREIN HE HAS STATED THAT HE HAS BEEN STAYING IN THE OSMANPURA HOUSE SINCE ONE AND HALF YEARS. THIS WOULD MEAN THAT THE ASSESSE E HAD TAKEN POSSESSION OF THE HOUSE SOMETIMES IN THE FIRST HALF OF THE YEAR 2000 WHICH IS ALMOST ONE YEAR PRIOR TO THE DATE OF PURCHASE ON 27-7-2001. FURTHER, SHRI M.H. ANDURE IN HIS STATEMENT U/S. 132(4) AT QUE. NO. 33 HAS ALSO CONFIRMED THAT SHRI N.H. JALKOTE USED TO MAKE THE PAYMENT TOWARDS CONSTRUCTION EXPENSES FROM TIME TO TIME. THE STA TEMENT OF SHRI M.H. ANDURE AT QUE. NO. 33 FIND SUPPORT FROM THE FAC T THAT THE ASSESSEE HAD ISSUED A CHEQUE NO.846381 DRAWN ON PUNJAB AND SIN DH BANK DT. 7- 1-2000 FOR AN AMOUNT OF RS.6,30,000/- TO SHRI M.H. A NDURE MUCH PRIOR TO THE DATE OF SALE DEED DT. 27-7-2001. OBVIOUSLY THI S WAS NOT AN ADVANCE TOWARDS PURCHASE OF SUCH PROPERTY SINCE THERE I S NO MENTION OF IT IN THE PURCHASE DEED DT.27-07-2001. THESE ARE IMP ORTANT EVIDENCES TO SHOW THAT THE ASSESSEE HAD TAKEN POSSESSION AND HAD OCCUP IED THE HOUSE DURING THE COURSE OF ITS CONSTRUCTION MUCH PRIOR TO THE DATE OF PURCHASE DEED AND HAD MADE PAYMENT TOWARDS CONSTRUCTIO N OF THIS HOUSE. OBVIOUSLY UNDER THESE CIRCUMSTANCES, IT WOULD BE HARD TO BELIEVE THAT THE EXPENDITURE TOWARDS CONSTRUCTION OF SUCH HOUSE WOULD HAVE BEEN MADE BY AN OUTSIDER NAMED SHRI M.H. ANDURE . THE OCCUPATION OF THE HOUSE BY THE ASSESSEE AND ITS PAYMENT T OWARDS CONSTRUCTION MUCH PRIOR TO THE DATE OF PURCHASE EXPOSE S THE MODUS OPERANDI OF SUCH TRANSFER OF HOUSE BY SHRI M.H. ANDURE TO THE ASSESSEE AT A UNDERVALUED PRICE AS PER THEIR PRE-PLANNED SCHEM E. IN THE LIGHT OF THE AFORESAID FINDINGS GIVEN IN THE PRECEDING PARAS, I HAVE NO HESITATION TO HOLD THAT THE ASSESSEE HAD DIRECTLY INVOLVED TOWARDS PAYMENT OF CONSTRUCTION EXPENSES OF THIS OSMANPURA HOUSE AND, THER EFORE, THE TOTAL COST OF CONSTRUCTION OF RS.52.58 LACS AS EVIDENCED FROM SEIZED DOCUMENT AT PAGE 11 OF ANNEXURE A-73 DOES NOT STAND EXPLAINED AND, THEREFORE, HAS TO BE TREATED AS UDI IN THE HANDS OF THE ASSESSEE. 4.16 THE SAID PROPERTY WAS FINALLY SOLD BY SHRI M.H. A NDURE TO THE ASSESSEE FOR A CONSIDERATION OF RS.12,50,000/- ON 27-7-20 01. HERE AGAIN IT IS OBSERVED THAT THE COST OF CONSTRUCTION ON T HE SAID PLOT IS STATED AT RS.52,58,000/- AS PER DOCUMENT A-73 AT , PAG E 11 WHICH HAS BEEN STRONGLY RELIED UPON BY THE AO AND ENCLOSED WITH THE ASSESSMENT ORDER MARKED AS ANNEXURE X-3. EXAMINATION OF THIS PAG E NO. 11 OF ANNEXURE A-73 SHOWS THAT IT IS A JOTTING OF 1 TO 33 IT EMS AND 34 TO 67 ITEMS RELATING TO THE VARIOUS ASPECTS OF CONSTRUCTION WO RK AGGREGATING TO RS. 32,04,272/- AND RS. 19,86,057/- RESPECTIVELY. O N THE BACK SIDE OF SAID PAGE 11 OF A-73, THE TOTAL OF THESE TWO FIGURES I S TAKEN AT RS. 51,90,329/- MARKED AS A. FURTHER, THERE IS ANOTHER LI ST OF SIX ITEMS AGGREGATING TO RS.12,500/- MARKED AS B. THE THIRD LIST ON THE BACK SIDE OF PAGE 11 IS OF SIX ITEMS AGGREGATING TO RS.55,105/-. THE TOTAL OF A + B + C IS ALSO SHOWN AT RS. 52,57,934/- I.E.RS.52,58,000/-. T HERE ARE TWO OTHER NOTINGS ON THE BACK SIDE OF PAGE 11. THE FIGURE OF RS.4,92,000/- IS WRITTEN AND IT REFERS TO THE SIMILAR FIGURE DEDUCTED FROM THE ACCOUNT OF SHRI M.H. ANDURE ON PAGE NO. 23 OF DIARY MARKED A-7 1 ON ACCOUNT OF EXPENDITURE AT OSMANPURA. THE FIGURE OF RS.47.66 LAKH S WITH A REMARK 'PREVIOUS DEDUCTION' IS SHOWN ON BACKSIDE OF PAGE NO. 11 OF A-73 AND IT REFERS TO THE ENTRY ON PAGE 18(OL) OF DIARY A-68 AS D ISCUSSED ABOVE. SHRI M.H. ANDURE IN HIS STATEMENT U/S. 132(4) DT. 23-1 1-2001 AT QUE. NO. 49 HAS ADMITTED THE COST OF CONSTRUCTION OF THIS HO USE AT RS.52.58 92 LACS AS HIS UNEXPLAINED INVESTMENT AFTER HAVING BEEN SHO WN THE RELEVANT ANNEXURE A-73, PAGE 11. 4.17 SUBSEQUENTLY DURING THE BLOCK ASSESSMENT PROCE EDINGS THE COST OF CONSTRUCTION OF THIS HOUSE WAS REVISED BY SHRI M .H. ANDURE TO RS.26.76 LACS WHICH WAS ALSO OFFERED AS HIS UDI IN HIS BLO CK RETURN. THE REASON FOR SUCH REVISION OF THE COST OF CONSTRUCTION WAS ATTRIBUTED ON ACCOUNT OF OTHER EXPENSES TOWARDS MHADA CONTRACT HAVIN G BEEN INCLUDED IN THE SAID SEIZED DOCUMENT. HOWEVER, NO EV IDENCE OR ANY SUPPORTING DOCUMENT WAS FURNISHED BEFORE ME BY SHRI M. H. ANDURE TO SUBSTANTIATE HIS CLAIM OF REDUCING THE COST OF CONSTRUCT ION OF THE SAID PROPERTY. THE ASSESSEE HAS CHALLENGED THE QUANTUM OF EX PENDITURE INCURRED IN THE CONSTRUCTION OF OSMANPURA HOUSE TAXED AS UDI IN HIS HANDS ON TWO GROUNDS VIZ (I) THAT THE VALUATION REPO RT OF SHRI PRADEEP KULKARINI DT.5-4-2001 OF THE SAID PROPERTY DETERMINE D THE VALUE OF RS.16,85,000/- WHICH WAS SEIZED FROM THE PREMISES OF THE ASSESSEE AND, THEREFORE, THE VALUE OF RS.52.58 LACS IS UNREALISTIC A ND UNACCEPTABLE, II) THAT THE TOTAL VALUE OF BILLS AND VOUCHERS PERTAINING TO CONSTRUCTION OF SUCH HOUSE SEIZED IN ANNEXURE A-19 TOTALS UP TO RS. 18, 35,778/- AND THUS, THE COST OF CONSTRUCTION OF RS.52.58 LACS IS ABNORM ALLY HIGH TO BE ACCEPTED AS CORRECT. I HAVE EXAMINED THE SO CALLED V ALUATION REPORT AND IT IS SEEN THAT THE SAID ARCHITECT HAS VALUED THE PROPE RTY WITHOUT TAKING INTO CONSIDERATION THE CORRECT VALUE OF ELECTRICAL F ITTINGS, SANITATION AND BATH ROOM FITTINGS ETC. AND, THEREFORE, THE VALUATIO N SEEMS TO HAVE BEEN GIVEN DURING THE COURSE OF CONSTRUCTION OF THE SAID HO USE. THIS IS ALSO EVIDENT FROM THE FACT THAT THE CONSTRUCTION OF THE H OUSE HAS CONTINUED EVEN AFTER THE DATE OF VALUATION DT. 5-4-2001 AS PRO VED FROM BILLS AND VOUCHERS SEIZED. FURTHER NO COGNIZANCE CAN BE TAKEN T O SUCH VALUATION REPORT SINCE SHRI M.H. ANDURE HAS ALSO NOT RELIED UPON THE SAME AT THE TIME OF OFFERING UNDISCLOSED INCOME OF RS.26.76 LACS TO WARDS CONSTRUCTION OF SUCH HOUSE IN HIS BLOCK RETURN. IN OTHE R WORDS, SHRI M.H. ANDURE ALSO HAS TAKEN THE VALUE OF COST OF CONSTRUCTION MUCH HIGHER THAN THE SAID VALUATION REPORT AND THUS, THE RELEVANC E OF SUCH VALUATION REPORT IN ASSESSING THE CORRECT VALUE OF THE COST OF CON STRUCTION IS UNACCEPTABLE AND HENCE REJECTED. 4.18 AS FAR AS THE RELIANCE PLACED BY THE ASSESSEE ON TH E TOTAL BILLS AND VOUCHERS SEIZED IN ANNEXURE A-19 GOES, I FIND THAT IT DOES NOT CONTAIN ALL THE BILLS AND VOUCHERS PERTAINING TO DIFFERENT SECTION S / HEADS OF EXPENSES THAT ARE REQUIRED TO BE MADE IN SUCH CONSTRUCT ION. THERE IS NOTHING ON RECORD TO PROVE THAT THE DOCUMENTS SEIZED IN ANNEXURE A-19 ARE FULL AND FINAL TOWARDS SUCH CONSTRUCTION OF HOUSE A ND, THEREFORE, I AM CONVINCED THAT SUBSTANTIAL EXPENSES HAVE BEEN OMITT ED IN THE BILLS AND VOUCHERS ETC. SEIZED IN ANNEXURE A-19. IN THE LI GHT OF THESE OBSERVATIONS I CANNOT ACCEPT THE TOTAL OF SUCH SEIZED B ILLS AND VOUCHERS AS COMPLETE AND SUFFICIENT EVIDENCE TO DETERMINE THE CORRECT COST OF CONSTRUCTION OF THE SAID HOUSE. IN FACT, THE DOCUMENT AT PAGE 11 OF ANNEXURE A-73 IS A SELF EXPLAINED DESCRIPTION OF THE TOTAL COST OF CONSTRUCTION OF THE SAID HOUSE AT RS.52.58 LACS WHICH HA S BEEN ACCEPTED AS TRUE AND CORRECT IN THE STATEMENT GIVEN BY SHRI M. H. ANDURE U/S. 132(4) DT. 23-11-2001 AND, THEREFORE, IT IS SUFFICIEN T EVIDENCE TO HOLD THE COST OF CONSTRUCTION OF THE HOUSE AT RS.52.58 LACS. THE OBJECTION RAISED BY THE ASSESSEE ON THE QUANTUM OF THE COST OF CONST RUCTION OF THE SAID HOUSE IS, THEREFORE, DESERVED TO BE REJECTED. 4.19 THEREFORE, GOING BY THE DOCUMENTS SEIZED DURING THE SEARCH OPERATION AS ALSO THE STATEMENT OF SHRI M.H. ANDURE U/S. 132(4), THE COST OF CONSTRUCTION OF HOUSE AT LACS HAS BEEN CORRECTLY ADOPTED BY THE 93 AO IN HIS ASSESSMENT ORDER. SHRI M.H. ANDURE HAD SOLD THE SAID PROPERTY TO THE ASSESSEE FOR A CONSIDERATION OF RS. 12.50 LACS, WHICH IS FAR BELOW THE COST OF THE SAID PROPERTY AT RS.52.58 LA CS AS EVIDENT FROM THE DOCUMENTS SEIZED DURING THE SEARCH OPERATIONS. I F IND NO SATISFACTORY EXPLANATION AS TO WHY THE SAID PROPERTY WA S SOLD AT A PRICE EVEN LOWER THAN 1/4 TH OF THE COST OF THE SAID PROPERTY. THE EXPLANATION GIVEN BY THE ASSESSEE IS THAT SHRI ANDURE WAS THE CO-BROT HER AND HE WAS IN URGENT OF MONEY AND THUS, THE TRANSACTION WAS MA DE BELOW THE COST OF CONSTRUCTION. EVEN IF GOING BY THE REVISED COST OF CONSTRUCTION ON THE SAID PLOT AT RS.26.76 LACS ADMITTED BY SHRI M.H. ANDURE, THE SALE HAS BEEN MADE TO THE ASSESSEE AT A PRICE OF LOWER THAN HAL F THE COST OF HOUSE. THE SO CALLED EXPLANATION FOR MAKING SALE BELOW THE COST, IS QUITE VAGUE WHICH DOES NOT STANDS SUBSTANTIATED WITH ANY CORRO BORATIVE EVIDENCE. IN FACT, IF THIS SALE BY SHRI ANDURE IS LIN KED WITH ITS PURCHASE FROM MRS. PATIL IT IS CLEAR THAT THERE HAS BEEN UNDER VALUATION OF THE SALE CONSIDERATION FROM MRS. PATIL TO SHRI ANDURE AND THER EAFTER TO THE ASSESSEE. THERE IS A CHAIN OF SUCH UNDER VALUATION FROM T HE TIME OF ACQUISITION OF THE SAID PROPERTY BY MRS. PATIL TO ITS SA LE TO THE ASSESSEE. THE WHOLE TRANSACTION OF PURCHASE AND SALE OF PROPERTY WAS A COLLUSIVE TRANSACTION TO GIVE BENEFIT TO THE ASSESSEE. IN THIS CASE , IT CAN BE CLEARLY SEEN THAT THE SOLE BENEFICIARY TO SUCH COLLUSIVE TRANSAC TION IS THE ASSESSEE AND, HENCE THE CONCLUSION DRAWN BY THE AO IN HO LDING UNEXPLAINED INVESTMENT IN THE PROPERTY IN THE HANDS O F ASSESSEE STANDS JUSTIFIED. 4.20 NOW IF WE ANALYSE THE SO CALLED EXPLANATION OF S HRI M.H. ANDURE IN SELLING THE PROPERTY AT A PRICE LOWER THAN ITS COST TO HIS CO-BROTHER, IT APPEARS TO BE UNREALISTIC IN THIS COMMERCIAL SOCIETY. E XAMINATION OF THE RUNNING ACCOUNT OF SHRI M.H. ANDURE AND HIS BROTHER- IN-LAW SHRI P.B. MAHAJAN AS APPEARING IN THE SEIZED DIARY DESCRIBES CROSS TRANSACTION OF SMALL QUANTUM BETWEEN THEM, WHICH SHOWS THAT EACH AND EVERY TRANSACTION WAS METICULOUSLY DESCRIBED WHICH REFLECTS T HE MENTALITY OF THE PERSON CONCERNED. IF THAT IS THE STATE OF AFFAIRS B ETWEEN SHRI M.H. ANDURE AND HIS BROTHER-IN-LAW, IT IS HARD TO BELIEVE THAT HE WOULD HAVE TAKEN A SUBSTANTIAL LOSS ON ACCOUNT OF SALE OF SUCH PROP ERTY TO HIS CO- BROTHER I.E. THE ASSESSEE. NO ONE IN TODAY'S WORLD IS M AGNANIMOUS TO SUFFER A PERSONAL FINANCIAL LOSS OF SUCH AN HIGH MAGNITU DE SO AS TO GIVE FINANCIAL BENEFIT TO HIS RELATIVE. I CANNOT TAKE TH E SO CALLED CONCOCTED STORY OF SELLING THE PROPERTY AT PRICE LOWER THAN THE COST, WHAT TO TALK OF MARKET PRICE. THE SUBMISSION OF THE ASSESSEE ON THIS ACCOOU NT IS, THEREFORE, VAGUE AND WITHOUT ANY SUBSTANCE AND HENCE DESERVES TO BE REJECTED . 4.21 IT IS A MATTER OF FACT THAT THE ASSESSEE AND HIS WIF E WERE THE RIGHTFUL AND LEGAL OWNER OF THE PROPERTY AT OSMANPUR A AT THE TIME OF SEARCH OPERATION AND, THEREFORE, THE ONUS LAY ON THE ASSESSEE TO PROVE HIS SOURCE OF INVESTMENT IN HOUSE COSTING RS.52.58 LACS AS PER DOCUMENT SEIZED. I FIND THAT THE ASSESSEE HAS NOT DISCHARGED HIS ON US IN PROVING THAT HE HAD NOT MADE ANY INVESTMENT OVER AND ABOVE T HE SALE CONSIDERATION STATED IN THE SALE DEED. 4.22 IN THE LIGHT OF DISCUSSIONS IN THE PRECEDING PARA, THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.52.58 LACS TOW ARDS CONSTRUCTION OF OSMANPURA HOUSE IN THE HANDS OF THE ASSE SSEE IS, THEREFORE, CONFIRMED. HOWEVER, SINCE THE ASSESSEE HAS E XPLAINED THE SOURCE OF INVESTMENT OF RS.12.50 LACS TOWARDS THE PURCH ASE OF THE SAID PROPERTY WHICH HAS NOT BEEN DISPUTED BY THE AO, THE ASSESSEE WOULD BE ELIGIBLE FOR A SET OFF OF THIS AMOUNT FROM THE TOTAL UNEXPLAINED INVESTMENT OF RS.52.58 LACS. THE AR DURING THE COURSE OF APPELLATE 94 PROCEEDINGS, HAS EXPLAINED THAT THE ASSESSEE HAD MADE THE PAYMENT OF RS.12.5 LACS TO THE VENDOR OUT OF BORROWINGS MADE OUT OF WITHDRAWALS FROM PROVIDENT FUND., GOVT. LOANS, AND CONTRIBUTION FROM HIS WIFE . THE REQUISITE DOCUMENTS IN SUPPORT OF THE SAME WERE PRODUCE D BEFORE ME AND THEREFORE CONSIDERING THE SAME THE SOURCE OF INVEST MENT OF RS. 12.5 LACS STANDS EXPLAINED. THE ASSESSEE IS, THEREFORE, ALLOWED SET OFF OF RS. 12.50 LACS AGAINST INVESTMENT OF RS.52.58 LACS IN THE SAI D HOUSE. 4.23 I MAY ADD HERE THAT ON PERUSAL OF THE SEIZED REC ORDS AND BLOCK ASSESSMENT ORDERS IN RESPECT OF SHRI M.H. ANDURE, IT IS N OTICED THAT THE COST OF PLOT AT RS.4,75,000/- BASED ON THE STAMP DUTY HAS BEEN HELD AS UNEXPLAINED INVESTMENT IN ACCOUNTING YEAR 1997-1998 AND TAXED AS UDI IN THE HANDS OF SHRI M.H.ANDURE.. THIS ISSUE HAS BEEN AD EQUATELY DISCUSSED IN THE APPELLATE ORDER OF SHRI M.H.ANDURE AT GROUND NO. 4. AND THEREFORE THE DECISION TAKEN THEREIN HAS NO BEARI NG IN THIS APPELLATE ORDER CONCERNING GROUND NO. 3.. CONSIDERIN G THE FACT THAT THE ASSESSEE HAD PURCHASED THE PROPERTY FROM SHRI M.H. ANDUR E VIDE SALE DEED DT. 27-7-2001 WHICH INCLUDES THE COST OF THE PLO T AND THE CONSTRUCTED HOUSE AS EVIDENT AT PAGE 2 (FIRST PARA) OF THE SALE DEED, THE COST OF PLOT STANDS COVERED IN THE SAID PAYMENT OF RS. 1 2.50 LACS MADE BY THE ASSESSEE AND, THEREFORE, INVESTMENT TOWARDS SUCH P LOT COULD NOT BE TREATED AS UDI IN THE HANDS OF THE ASSESSEE. I AM, T HEREFORE OF THE VIEW THAT THE ACTION OF THE AO IN TREATING THE UNEX PLAINED INVESTMENT ON THE COST OF PLOT IN THE HANDS OF SHRI M.H.ANDURE AND THE UNEXPLAINED EXPENDITURE TOWARDS CONSTRUCTIONS OF THE HOUSE AT OSMAN PURA PROPERTY IN THE HANDS OF SHRI M.H.JALKOTE AS TWO INDEPENDENT T RANSACTION HAVING NO BEARING AGAINST EACH OTHER. I MAY MENTION HERE TH AT THE ASSESSEE HAS TAKEN A PLEA THAT WHEN THE INVESTMENT IN OSMANPURA PL OT HAS BEEN ASSESSED AS UDI ON SUBSTANTIVE BASIS IN THE HANDS OF MR. M.H. ANDURE, THEN THE CORRESPONDING COST OF CONSTRUCTION OF HOUSE ON THE SAID PLOT ALSO NEEDED TO BE ASSESSED AS UNEXPLAINED EXPENDITURES OF MR. ANDURE AND NOT THAT OF THE ASSESSEE. IN THIS CONNECTION, I MAY REITERATE THAT THE PURCHASE OF PLOT BY MR. ANDURE IN THE ACCOUNTING YEA R 1997-98 AND THE CORRESPONDING EXPENDITURE TOWARDS CONSTRUCTION OF HOUSE BY MR. N.H.JALKOTE AS EVIDENT FROM THE DOCUMENTS SEIZED DURIN G SEARCH OPERATION, ARE TWO INDEPENDENT TRANSACTIONS MADE IN D IFFERENT ACCOUNTING YEARS WITH INVOLVEMENT OF RESPECTIVE PERSON S IN QUESTION. IT IS ALSO PERTINENT TO MENTION HERE THAT THE CONFIRMATI ON OF ADDITIONS TOWARDS UNEXPLAINED EXPENDITURE IN OSMANPURA HOUSE IN THE HANDS OF THE ASSESSEE IN THIS ORDER, SHOULD NOT BE CONSTRUED AS MY ACCEPTANCE OF THE CONTENTS OF THE RUNNING ACCOUNT IN THE NAME OF MR. M.H.ANDURE APPEARING IN THE DIARY A-67, A-68 AND A-71 TO HAVE BELONGED TO THE ASSESSEE. IN FACT THE ADDITION TOWARDS UNEXPLAINED EXPE NDITURE IN THE HOUSE HAS BEEN CONFIRMED IN THE HANDS OF THE ASSESSEE, NO T ON ACCOUNT OF ENTRIES APPEARING IN THE SAID DIARIES A-67. 68 AND 71, BUT BASED ON THE EVIDENCES AVAILABLE IN SEIZED DOCUMENTS A-73 (PAGE NO.11) AND A- 19 AND ALSO THE NATURE OF COLLUSIVE AT GROUND NO.3 CA NNOT BE READ AS CONTRADICTORY TO MY FINDINGS GIVEN IN GROUND NO.1 AN D 2. IN THE LIGHT OF ABOVE DISCUSSION, I AM TO HOLD THAT THE UNEXPLAINED EX PENDITURE TOWARDS INVESTMENT IN OSMANPURA HOUSE TO THE TUNE OF RS. 52.58 LACS (-) RS.12.50 LACS AMOUNTING TO RS.40.08 LACS IS TREATED AS UD I IN THE HANDS OF THE ASSESSEE. IN THE RESULT, ACTION OF THE AO IN MAKI NG ADDITION ON ACCOUNT OF UNDISCLOSED EXPENDITURE ON OSMANPURA HOUSE I S CONFIRMED TO THE EXTENT OF RS.40.08 LACS. THE APPEAL ON THIS GRO UND IS HENCE PARTLY ALLOWED. 95 34.9 AGGRIEVED WITH SUCH PART RELIEF BY THE LD. CIT (A) THE ASSESSEE WE WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 35. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD GIVEN THE VALUATION REPORT OF THE REGISTERED VALUER PLACED ON PAGE 452 OF THE PAPER BOOK NO.3 AS PER WHICH THE HOUSE IS VALUE D AT RS.16.85 LAKHS. THIS VALUATION DOES NOT INCLUDE THE FURNITURES. RE FERRING TO PAGE 445 OF THE PAPER BOOK, HE SUBMITTED THAT THE LAND WAS PURC HASED FOR RS.2.21 LAKHS ONLY. REFERRING TO PAGE 463 OF THE PAPER BOO K, HE SUBMITTED THAT THE SALE DEED OF THE HOUSE FROM SHRI ANDURE TO SHRI JALKOTE SHOWS THE CONSIDERATION AT RS.12.50 LAKHS. 35.1 HE SUBMITTED THAT THE SEIZED PAPER-ANNEXURE-3 NOT ONLY MENTIONS THE EXPENDITURE ON OSMANPURA HOUSE BUT IT ALSO CONTAINS THE DETAILS OF VARIOUS OTHER EXPENSES NOT RELATING TO T HE HOUSE CONSTRUCTION. REFERRING TO CERTAIN ITEMS HE SUBMITTED THAT ITEM N O.6 IS A MOBILE EXPENDITURE, ITEM NO. 7 IS A PAYMENT TO DREAMS CREA TION, A CLOTH SHOP. THUS, THIS PAPER INDICATES EXPENSES OF SHRI ANDURE OTHER THAN THOSE ON THE CONSTRUCTION OF THE BUNGALOW. IT ALSO INCLUDES THE EXPENSES ON VARIOUS SITES OF SHRI ANDURE. THEREFORE, IT IS INCO RRECT TO CONSIDER THAT ALL THESE EXPENSES ARE INCURRED ONLY ON OSMANPURA H OUSE. SHRI ANDURE HAS SUBMITTED THAT THE WORK AT HIS OTHER SITES LIK E MHADA WAS GOING ON AND THE EXPENSES RELATE TO HIS VARIOUS SITES AND NOT ONLY THE OSMANAPURA HOUSE. ACCORDINGLY, SHRI ANDURE HAS LIST ED OUT THE EXPENSES ON A VERY BROAD SCALE PERTAINING TO OSMANP URA HOUSE ONLY TOTALING TO RS.26,76,479/-. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE LIST OF SUCH EXPENSES AND SUBMITTED THAT THE ADDITION IS WRONGLY MADE ON THE BASIS OF THE SE IZED PAPER ANNEX X3 96 AND AT THE MOST THE ADDITION CAN BE RS.14,26,479/- [I.E. COST AS PER VALUATION REPORT OF RS.26,76,479/- LESS RS.12,50,00 0/- AS DISCLOSED BY THE ASSESSEE IN THE BOOKS] 36. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 37. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE AO IN THE INSTANT CASE MADE AN ADDITION OF RS.52,58,000/- ON THE BASIS OF CERTAIN NOTINGS FOUND IN THE RUNNING ACCOUNT OF SHRI M.H. A NDURE IN THE SEIZED DIARY A-68 AND A-71 AND VARIOUS OTHER DOCUMENTS. T HE SAID ADDITION WAS ON THE BASIS OF THE SUM TOTAL OF THE FOLLOWING ITEMS : I. PAGE 11 OF ANNEXURE A-73 ITEM NO.1 TO 33 RS.32, 04,272/- II. ITEM NO.34 TO 67 OF PAGE 11, ANNEXURE A-73 RS. 19,86,057/- III. THE LIST OF 6 ITEMS MARKED CAPITAL B RS. 12 ,500/- IV. BACKSIDE OF PAGE 11/6 ITEMS RS.55,105/- ------------------ TOTAL RS.52,57,934/- ROUNDED OFF TO RS.52,58,000/- ------------------ 37.1 IN THIS CASE THE ASSESSEE HAS PURCHASED THE HO USE PROPERTY AT OSMANPURA FROM SHRI M.H. ANDURE FOR A CONSIDERATION OF RS.12,50,000/-. THE VARIOUS DOCUMENTS SEIZED FROM THE RESIDENCE OF THE ASSESSEE SHOWED THAT COST OF CONSTRUCTION OF TH E SAID HOUSE AT OSMANPURA WAS RS.52,58,000/- AS NOTED ABOVE. EVEN SHRI M.H. ANDURE IN HIS ANSWER TO QUESTION NO.49 RECORDED U/S .132(4) HAD ALSO STATED THE COST OF CONSTRUCTION OF THE SAID HOUSE A T RS.52,58,000/-. THE AO, THEREFORE, MADE ADDITION OF RS.52,58,000/- TO T HE TOTAL INCOME OF THE ASSESSEE IGNORING THE REVISED COST OF CONSTRUCT ION DECLARED BY SHRI 97 M.H. ANDURE AT RS.26,76,479/-. WE FIND IN APPEAL TH E LD.CIT(A) ALTHOUGH SUSTAINED THE ADDITION OF RS.52,58,000/- B EING THE COST OF CONSTRUCTION OF THE HOUSE PROPERTY AT OSMANPURA, HO WEVER, ALLOWED RELIEF OF RS.12,50,000/- BEING PURCHASE PRICE PAID BY THE ASSESSEE ON 27-07-2001 AND THE SOURCE OF WHICH WAS DECLARED BY HIM. THUS, EFFECTIVELY, HE SUSTAINED ADDITION OF RS.40,08,000/ - BEING UNEXPLAINED EXPENDITURE TOWARDS INVESTMENT IN OSMANPURA HOUSE. 37.2 SO FAR AS THE GRIEVANCE OF THE REVENUE IS CONC ERNED, WE FIND THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) FOR DEDUCTING THE AMONT OF RS.12,50,000/- FROM THE ADDITION OF RS.52, 58,000/- MADE BY THE AO. THERE IS NO DISPUTE TO THE FACT THAT THE A SSESSEE IN THE INSTANT CASE HAS SHOWN TO HAVE PURSHED THE HOUSE FROM SHRI M.H. ANDURE FOR A CONSIDERATION OF RS.12,50,000/- ON 27-07-2001 AND H AS EXPLAINED THE SOURCE OF THE SAME. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.12,50,000/- OUT OF THE TOTAL ADD ITION OF RS.52,58,000/- MADE BY THEAO. THE GROUNDS RAISED BY THE REVENUE A RE ACCORDINGLY DISMISSED. 37.3 SO FAR AS THE GRIEVANCE OF THE ASSESSEE IS CON CERNED REGARDING THE ADDITION OF RS.40,08,000/- IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SEIZED PAPER ANNEXURE X-3 NOT ONLY MENTIONS THE EXPENDITURE OF OSMANPURA HOUSE BUT IT ALSO CONTAINS CERTAIN OTHER EXPENSES NOT RELATING TO THE HOUSE CONSTRUCTION. A CCORDING TO HIM THE LIST CONTAINS THE EXPENDITURE TOWARDS MOBILE EXPENS ES, PAYMENT TO CLOTH SHOP ETC. THEREFORE, THIS PAPER INDICATES EXPENSES OF SHRI M.H. ANDURE 98 OTHER THAN THOSE ON THE CONSTRUCTION OF THE BUNGALO W. APART FROM THIS, ACCORDING TO LD. AUTHORISED REPRESENTATIVE, IT ALSO CONTAINS CERTAIN EXPENSES RELATING TO THE CONSTRUCTION BUSINESS AND THE TOTAL OF CONSTRUCTION EXPENSES COMES ONLY TO RS.26,76,479/-. THEREFORE, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE A DDITION SHOULD BE RESTRICTED TO RS.14,26,479/- BEING DIFFERENCE BETWE EN RS.26,76,479/- AND RS.12,50,000/-. 37.4 WE DO NOT FIND ANY SUBSTANCE IN THE ABOVE ARGU MENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITION SHOULD B E RESTRICTED TO RS.14,26,479/-. IT IS AN ADMITTED FACT THAT SHRI M .H. ANDURE IN HIS STATEMENT RECORDED U/S.132(4) HAD STATED THE COST O F CONSTRUCTION OF THE HOUSE AT OSMANPURA AT RS.52,58,000/- AS PER HIS ANS WER TO QUESTION NO.49 RECORDED U/S.132(4). HOWEVER, IN THE BLOCK A SSESSMENT PROCEEDINGS, THE COST OF CONSTRUCTION OF THIS HOUSE WAS REVISED TO RS.26,76,479/- WITHOUT ANY SUPPORTING EVIDENCE. AT THE SAME TIME, FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE AS WELL AS ANNEXURE X-3 WHICH IS ANNEXED TO THE ASSESSMENT ORDER, WE FI ND THE LIST CONTAINS CERTAIN EXPENSES SUCH AS MOBILE BILL EXPENSES, PAY MENT TO SOME CLOTH SHOP WHICH DO NOT RELATE TO THE CONSTRUCTION OF HOU SE BUT SUCH EXPENSES ARE VERY NEGLIGIBLE. CONSIDERING THE TOTALITY OF T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE ESTIMATE THE COST OF CONSTRUCTION OF THE HOUSE INCLUDING COST OF LAND AT RS.52 LAKHS. SINCE THE ASSESSEE HAS DECALRED THE AMOUNT OF RS.12,50,000/- TOWARDS PURCH ASE OF THE HOUSE, THEREFORE, THE BALANCE AMOUNT OF RS.39,50,000/- (I. E. RS. 52 LAKHS - RS.12,50,000/-) HAS TO BE CONSIDERED AS UNEXPLAINED INVESTMENT OF THE ASSESSEE TOWARDS HOUSE CONSTRUCTION. THUS, AS AGAI NST ADDITION OF 99 RS.40,08,000/- BY THE CIT(A), THE ADDITION IS RESTR ICTED TO RS.39,50,000/-. THE ASSESSEE GETS RELIEF OF RS.58, 000/-. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY PARTLY ALLOWE D. 38. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS THE APPEAL FILED BY THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12-05-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PAND A) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 12 TH MAY, 2014 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, NAGPUR 4. THE CIT-I, NAGPUR 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE